600 600 500 150 650 -50 700 700 575 150 725 -25 800 800 650 150 800 900 900 725 150 875 25 1,000 1,000 800 150 950 50 1,100 1,100 875 150 1,025 75 1,200 1,200 950 150 1,100 100 f. Suppose that planned investment increased to $250. Write out the new planned Aggregate Expenditure function. g. What is the value of the multiplier in Arcadia? (Note: you are being asked to provide a numerical answer) h. What is the new income-expenditure equilibrium real GDP? (Noté: in addition to providing a numerical answer, you must show your work. You may use either a table or algebra to arrive at your answer. If you want to use a table, you may use Table 1 below. If you use the table, you do not need to fill in all of the blank cells. You may just fill in enough cells to help you arrive at your answer.) ITYPE YOUR ANSWER BELOW (AND FILL IN TABLE 1 BELOW IF YOU ARE USING THE TABLE TO SUPPORT YOUR ANSWER. IF YOU ARE USING ALGEBRA TO ANSWER THE QUESTION YOU CAN JUST SHOW YOUR WORK BELOW AND YOU DO NOT NEED TO ALSO FILL IN THE TABLE).]
600 600 500 150 650 -50 700 700 575 150 725 -25 800 800 650 150 800 900 900 725 150 875 25 1,000 1,000 800 150 950 50 1,100 1,100 875 150 1,025 75 1,200 1,200 950 150 1,100 100 f. Suppose that planned investment increased to $250. Write out the new planned Aggregate Expenditure function. g. What is the value of the multiplier in Arcadia? (Note: you are being asked to provide a numerical answer) h. What is the new income-expenditure equilibrium real GDP? (Noté: in addition to providing a numerical answer, you must show your work. You may use either a table or algebra to arrive at your answer. If you want to use a table, you may use Table 1 below. If you use the table, you do not need to fill in all of the blank cells. You may just fill in enough cells to help you arrive at your answer.) ITYPE YOUR ANSWER BELOW (AND FILL IN TABLE 1 BELOW IF YOU ARE USING THE TABLE TO SUPPORT YOUR ANSWER. IF YOU ARE USING ALGEBRA TO ANSWER THE QUESTION YOU CAN JUST SHOW YOUR WORK BELOW AND YOU DO NOT NEED TO ALSO FILL IN THE TABLE).]
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
I just need help on f g and h
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In the country of Arcadia, the mìnimum amount of consumption spending that will occur in a
given year is $50- that is, no matter what level of income households have, the aggregate
amount of consumption spending in the economy will be at least $50. In addition, for every extra
dollar of national income, consumption spending will increase by $0.75. (Note: For the entirety
of this problem, assume that Taxes = transfers = 0, and the aggregate price level in Arcadia is
fixed.)
a. What is the marginal propensity to consume in Arcadia?
600
600
500
150
650
-50
700
700
575
150
725
-25
800
800
650
150
800
%3D
900
900
725
150
875
25
1,000
1,000
800
150
950
50
The marginal propensity to consume in Arcadia is 0.75
1,100
1,100
875
150
1,025
75
b. Write out the consumption function for the Arcadian economy.
1,200
1,200
950
150
1,100
100
C= 50 + 0.75Y
In 2019 in Arcadia, planned investment expenditure was $150, there was no government
spending or taxation or government transfers and no exports or imports.
f. Suppose that planned investment increased to $250. Write out the new planned Aggregate
Expenditure function.
c. Write out the planned Aggregate Expenditure function for Arcadia.
g. What is the value of the multiplier in Arcadia? (Note: you are being asked to provide a
numerical answer)
AE= 200 + 0.75
d If real GDP (i.e. value of all production in the Arcadian economy) in 2019 were $600,
what would be the level of planned Aggregate Expenditure? Would production be exactly
equal to expenditure, or would suppliers have to reduce or increase inventories? If you've
answered that suppliers would have to reduce or increase inventories, specify the amount
of the change and be sure to indicate whether it is an increase or a decrease.
h. What is the new income-expenditure equilibrium real GDP? (Noté: in addition to
providing a numerical answer, you must show your work. You may use either a table or
algebra to arrive at your answer. If you want to use a table, you may use Table 1 below. If
you use the table, you do not need to fill in all of the blank cells. You may just fill in
Planned Expenditure: AE= $650
Therefore, the aggregate expenditure is not equal to the production , as the
production is only $600. So, there is need to increase inventories of $50
enough cells to help you arrive at your answer.) ĮTYPE YOUR ANSWER BELOW (AND FILL
IN TABLE 1 BELOW IF YOU ARE USING THE TABLE TO SUPPORT YOUR ANSWER. IF YOU
ARE USING ALGEBRA TO ANSWER THE QUESTION YOU CAN JUST SHOW YOUR WORK
BELOW AND YOU DO NOT NEED TO ALSO FILL IN THE TABLE).1
e. What was the income-expenditure equilibrium level of real GDP in Arcadia in 2019?
Support your answer by filling in all of the blank cells in the table below. (Note: you
need to provide a numerical answer for the income-expenditure equilibrium level of
GDP in Arcadia in 2019 AND fill in the table below)
C= 50 + 0.75y
Table 1. For (optional) use with Problem 1 part (h)
I=150
AE= 200 +0.75Y
Planned
Disposable
Income
Planned
Aggregate
Expenditure
(AEp)
Unplanned
Consumption Investment
(C)
Investment
Real GDP
(YD)
(,)
(L)
Planned
Disposable
Aggregate
Expenditure
(AE,)
Planned
Unplanned
Investment
Consumption Investment
(C)
Income
Real GDP
(Yp)
(I,)
(IL)
500
500
425
150
575
-75
Page 1 of 3
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Transcribed Image Text:84%v
ew
Zoom
Add Page
Insert
Table
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Text
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Comment
Collaborate
In the country of Arcadia, the mìnimum amount of consumption spending that will occur in a
given year is $50- that is, no matter what level of income households have, the aggregate
amount of consumption spending in the economy will be at least $50. In addition, for every extra
dollar of national income, consumption spending will increase by $0.75. (Note: For the entirety
of this problem, assume that Taxes = transfers = 0, and the aggregate price level in Arcadia is
fixed.)
a. What is the marginal propensity to consume in Arcadia?
600
600
500
150
650
-50
700
700
575
150
725
-25
800
800
650
150
800
%3D
900
900
725
150
875
25
1,000
1,000
800
150
950
50
The marginal propensity to consume in Arcadia is 0.75
1,100
1,100
875
150
1,025
75
b. Write out the consumption function for the Arcadian economy.
1,200
1,200
950
150
1,100
100
C= 50 + 0.75Y
In 2019 in Arcadia, planned investment expenditure was $150, there was no government
spending or taxation or government transfers and no exports or imports.
f. Suppose that planned investment increased to $250. Write out the new planned Aggregate
Expenditure function.
c. Write out the planned Aggregate Expenditure function for Arcadia.
g. What is the value of the multiplier in Arcadia? (Note: you are being asked to provide a
numerical answer)
AE= 200 + 0.75
d If real GDP (i.e. value of all production in the Arcadian economy) in 2019 were $600,
what would be the level of planned Aggregate Expenditure? Would production be exactly
equal to expenditure, or would suppliers have to reduce or increase inventories? If you've
answered that suppliers would have to reduce or increase inventories, specify the amount
of the change and be sure to indicate whether it is an increase or a decrease.
h. What is the new income-expenditure equilibrium real GDP? (Noté: in addition to
providing a numerical answer, you must show your work. You may use either a table or
algebra to arrive at your answer. If you want to use a table, you may use Table 1 below. If
you use the table, you do not need to fill in all of the blank cells. You may just fill in
Planned Expenditure: AE= $650
Therefore, the aggregate expenditure is not equal to the production , as the
production is only $600. So, there is need to increase inventories of $50
enough cells to help you arrive at your answer.) ĮTYPE YOUR ANSWER BELOW (AND FILL
IN TABLE 1 BELOW IF YOU ARE USING THE TABLE TO SUPPORT YOUR ANSWER. IF YOU
ARE USING ALGEBRA TO ANSWER THE QUESTION YOU CAN JUST SHOW YOUR WORK
BELOW AND YOU DO NOT NEED TO ALSO FILL IN THE TABLE).1
e. What was the income-expenditure equilibrium level of real GDP in Arcadia in 2019?
Support your answer by filling in all of the blank cells in the table below. (Note: you
need to provide a numerical answer for the income-expenditure equilibrium level of
GDP in Arcadia in 2019 AND fill in the table below)
C= 50 + 0.75y
Table 1. For (optional) use with Problem 1 part (h)
I=150
AE= 200 +0.75Y
Planned
Disposable
Income
Planned
Aggregate
Expenditure
(AEp)
Unplanned
Consumption Investment
(C)
Investment
Real GDP
(YD)
(,)
(L)
Planned
Disposable
Aggregate
Expenditure
(AE,)
Planned
Unplanned
Investment
Consumption Investment
(C)
Income
Real GDP
(Yp)
(I,)
(IL)
500
500
425
150
575
-75
Page 1 of 3
Page 2 of 3
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