5. Expenditure Gaps The following graph shows the planned expenditure line (AE) for an economy where current equilibrium income is $400 billion and full-employment income is $650 billion. REAL EXPENDITURE (Billions of dollars) 800 700 600 500 400 300 200 100 0 0 100 45-degree line The economy is experiencing the income gap would require a $ this economy is PE Full-Employment Income 200 300 400 INCOME (Billions of dollars) 500 600 700 800 billion O PE (?) billion. Closing in government spending. Thus the value of the multiplier for with the absolute value of the gap equal to $

5. Expenditure Gaps The following graph shows the planned expenditure line (AE) for an economy where current equilibrium income is $400 billion and full-employment income is $650 billion. REAL EXPENDITURE (Billions of dollars) 800 700 600 500 400 300 200 100 0 0 100 45-degree line The economy is experiencing the income gap would require a $ this economy is PE Full-Employment Income 200 300 400 INCOME (Billions of dollars) 500 600 700 800 billion O PE (?) billion. Closing in government spending. Thus the value of the multiplier for with the absolute value of the gap equal to $

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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QUESTION 21 What is the marginal propensity to consume? a. The ratio of the change in consumption to the change in national income O b. The proportion of national income that goes on consumption O c. The additional spending by a consumer when the price of a good falls O d. The additional revenue received by a firm when it attracts a new customer
Suppose that an economy consists of only two individuals. Jeremy has $1150 available to spend on goods. He decides to purchase $750 worth of produce from Michele in the current month. No other economic activity takes place during the current month. Using this information, answer the questions. For the current month, what is the economy's income? $ For the current month, what is the economy's expenditure? $ In an economy, how are income and expenditure related? O Income is less than expenditure. Income is greater than expenditure. They are unrelated. O They are equal.
4. Planned expenditure and income The following table shows consumption (C), investment spending (I), and government purchases (G), in a hypothetical economy for various levels of income. Also assume that there is an income tax rate of 25%, that base consumption is $100 billion, and that the MPC is 0.333, or 1/3. This economy is closed, with no international trade, therefore net exports are equal to zero and should not be considered. Use the given information to fill in disposable income, consumption, and planned expenditures in the following table. Income: Real Disposable (After Tax) Planned GDP Income C I, G Expenditures (Billions of (Billions of dollars) (Billions of (Billions of (Billions of (Billions of dollars) dollars) dollars) dollars) dollars) 100 50 150 100 50 150 200 50 150 300 50 150 400 50 150 500 50 150
3. Many parts of the economy are related to one another. In particular, a decrease in spending in one area may have an impact somewhere else. Provide an example of this scenario. Economic theory tells us that "one person's spending is another person's income." What is meant by this phrase? Explain in your own words.
Question 21 Households change their spending by $10 billion due to a decrease in net wealth. The country's marginal propensity to consume is 0.8. What impact will this have on real GDP? Consumption spending will increase by $10 billion Investment spending will decrease by $50 billion Consumption spending will increase by $50 billion Consumption spending will decrease by $50 billion O Consumption spending will decrease by $10 billion O ooo O
I need help with d. only
If the economy is currently in equilibrium at point a, and full employment income is $4,000, how much in additional expenditures is needed to move this economy to full employment? $ This level of spending is called the level of spending. Saving and investment 600 400 200 OHA -200 -400 2,000 2,500 3,000 3,500 4,000 Income