5. Macroeconomic equilibrium and the multiplier effectThe following graph shows a hypothetical economy in short-run equilibrium at an output level of $400 billion and a price level of 100. Suppose thatpotential GDP in this economy is $500 billion.Use the grey line (star symbol) to plot the long-run aggregate supply (LRAS) curve on the graph.PRICE LEVEL20017515012510075502500100200 300 400 500REAL GDP (Billions of dollars)ASAD600 700800ADASPotential GDP? Based on the graph, this economy is experiencingThe size of the of the gap is $Shift the aggregate demand (AD) curve to illustrate how potential output in this economy can be restored.Note: Select and drag one or both of the curves to the desired position. Curves will snap into position, so if you try to move a curve and it snaps backto its original position, just drag it a little farther.To eliminate the GDP gap in this economy, the aggregate demand curve must shift to thebillion.by $billion at each price level.Suppose that each $100 increase in disposable income causes consumption spending in the economy to rise by $80. The economy's marginalpropensity to consume (MPC) is ▼, which means that the oversimplified multiplier for this economy is and the shift in the aggregatedemand curve required to restore the potential GDP level would occur if investment spendingby

5. Macroeconomic equilibrium and the multiplier effect The following graph shows a hypothetical economy in short-run equilibrium at an output level of $400 billion and a price level of 100. Suppose that potential GDP in this economy is $500 billion. Use the grey line (star symbol) to plot the long-run aggregate supply (LRAS) curve on the graph. PRICE LEVEL 200 175 150 125 100 75 50 25 0 0 100 200 300 400 500 REAL GDP (Billions of dollars) AS AD 600 700 800 AD AS Potential GDP (?)

5. Macroeconomic equilibrium and the multiplier effect The following graph shows a hypothetical economy in short-run equilibrium at an output level of $400 billion and a price level of 100. Suppose that potential GDP in this economy is $500 billion. Use the grey line (star symbol) to plot the long-run aggregate supply (LRAS) curve on the graph. PRICE LEVEL 200 175 150 125 100 75 50 25 0 0 100 200 300 400 500 REAL GDP (Billions of dollars) AS AD 600 700 800 AD AS Potential GDP (?)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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3. Why the aggregate demand curve slopes downward The graph below shows the aggregate demand (AD) curve for a hypothetical economy. At point X, the quantity of output demanded is $500 billion, and the price level is 120. Moving up along the AD curve from point X to point Y, the quantity of output demanded falls to $300 billion, and the price level rises to 140. PRICE LEVEL 170 160 150 140 130 120 110 100 90 Y X AD (?
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4. Study Questions and Problems #4 Real GDP (Y) and aggregate expenditures (AE) are shown for an economy in the first two columns of the following table. Suppose that economic forecasters predict government spending to increase in the near future from G=$1 trillion to G=$1.25 trillion. Recalculate the value of aggregate expenditures given the new value of G=$1.25 trillion. Enter those values to the second decimal place in the third column of the table. Real GDP (Y) (Trillions of dollars per year) 0 1 2 3 4 5 6 7 8 9 10 G=$1 trillion (Trillions of dollars per year) 1.25 2.00 2.75 3.50 4.25 Aggregate Expenditures 5.00 5.75 6.50 7.25 8.00 8.75 G=$1.25 trillion (Trillions of dollars per year) 1.56 2.5 3.44 4.38 5.31 6.25 7.19 8.13 9.06 10 10.94 The black line on the following graph represents the 45-degree line where real GDP equals aggregate expenditures. Use the blue points (circle symbol) to plot the aggregate expenditures line for this economy when G-$1.25 trillion. Line segments will…
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Instructions: Enter your responses as a whole number. Identify the macro equilibrium. Instructions: Use the tool provided 'QE' to identify the current macro equilibrium on the graph. The current macro equilibrium is when real GDP is $ billion. Suppose that full - employment GDP is $12 billion. The real GDP gap is $ billion. Aggregate demand must shift (left or right) by $ billion to achieve the full - employment equilibrium.Real GDP (in billions of dollars per year)
4. What do we mean when we talk about the export base of a region? How does an increase in the export base affect total employment? How does this relate to the multiplier? What factors limit the size of the multiplier within cities?
Question 2 Refer to the information provided in Figure 23.9 below to answer the question(s) that follow. Aggregate expenditures ($ millions) 225 200 175 150 45° AE 100 200 300 Aggregate output ($ millions) Figure 23.9 a) Refer to Figure 23.9. Write the equation for the aggregate expenditure function (AE). Show your work. b) Refer to Figure 23.9. What is the equilibrium level of output in this economy? State the equilibrium condition used to determine this. c) Explain the forces that maintain/drive the economy to this equilibrium by considering what will happen at the following two levels of output, $300 million and $100 million. You will need to discuss changes in investment through unplanned inventories and the response of output. d) Refer to Figure 23.9. How will equilibrium aggregate expenditure and equilibrium aggregate output change as a result of a decrease in investment by $20 million? e)The interest rate is an exogenous factor that effects the level of investment in an economy.…
U.S. durable goods orders boosted by aircraft The Commerce Department reported that orders for durable goods increased 2.1 percent in July. Orders for Boeing aircraft rebounded. Source: Financial Times, August 26, 2019 Explain the process by which an increase in durable goods orders at a constant price level changes equilibrium expenditure and real GDP. A planned increase in durable goods is an increase in planned investment. When planned investment increases, _______. A. the economy moves production into investment from consumption expenditure, government expenditure on goods and services, and exports. Real GDP decreases B. real GDP cannot change unless the price level also changes C. real GDP increases by an amount equal to the change in investment. Disposable income decreases to make up for the increase in investment so that the economy returns to its long-run equilibrium D. real GDP initially increases by an amount equal to the change in…
3/25/22, 8:59 PM Assignment Print View 8. Assume the economy is currently in equilibrium at its full-employment level of output, the money market is in equilibrium, and the MPC = 0.75. a. Suppose there is an increase in government spending that causes aggregate demand to increase by $16 billion. Show the increase in aggregate demand on the graph. Instructions: Use the tool provided "Aggregate Demand" to plot the new aggregate demand curve. Use the tool provided "New GDP" to plot the new equilibrium. AD and AS Model 200 Tools LRAS 180 AS 160 Aggregate Dei New GDP 140 120 100 80 60 AD 40 20 16 32 48 64 80 96 112 128 144 160 Real GDP (billions of dollars) Now suppose the Federal Reserve wants to keep inflation from hurting the economy and maintain output at the full-employment level. https://ezto.mheducation.com/hm.tpx?todo=c15SinglePrintView&singleQuestionNo=8.&postSubmissionView=13252718377637707&wid=13252718466136846&rol... 1/3 Price Level
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