7. Deriving and exploring the total expenditures curve The following graph shows total production (TP) and the level of Natural Real GDP (NRGDP) for a hypothetical economy. When Real GDP is $325 billion, consumption is $275 billion, government purchases are $50 billion, and investment is $25 billion. When Real GDP is $375 billion, consumption is $300 billion, government purchases are $50 billion, and investment is $25 billion. Use the blue line (circle symbol) to plot the economy's total expenditure function within a simplified Keynesian framework. NRGDP 450 425 Xx 400 375 350 O 325 350 TOTAL EXPENDITURE (Billions of dollars) 500 475 325 300 TP 300 O 375 400 425 REAL GDP (Billions of dollars) 450 475 500 TE ?

7. Deriving and exploring the total expenditures curve The following graph shows total production (TP) and the level of Natural Real GDP (NRGDP) for a hypothetical economy. When Real GDP is $325 billion, consumption is $275 billion, government purchases are $50 billion, and investment is $25 billion. When Real GDP is $375 billion, consumption is $300 billion, government purchases are $50 billion, and investment is $25 billion. Use the blue line (circle symbol) to plot the economy's total expenditure function within a simplified Keynesian framework. NRGDP 450 425 Xx 400 375 350 O 325 350 TOTAL EXPENDITURE (Billions of dollars) 500 475 325 300 TP 300 O 375 400 425 REAL GDP (Billions of dollars) 450 475 500 TE ?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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se the information in the table to answer the following questions All numbers are in billions of 2012 dollars Real GDP (Y) $10,000 $11,000 $12,000 Consumption (C) $8.500 $0,300 $10,100 $10,000 $11.700 Planned Investment (1) $1,000 $1,000 $1,000 $13,000 $14,000 The equilibrium level of GDP is $ 12000 billion. The MPC is 0.8 (enter your response to two decimal places) Suppose that not exports increase by $200 billion. Using the multiplier formula, determine the new level of GDP A $200 billion increase in net exports leads to a change in spending of spillon, so the new level of GDP will be $billion $1,000 $1,000 Government Purchases (G) $1,400 $1,400 $1,400 $1,400 $1,400 Net Exports (NX) -$500 -$500 $500 -$500 -$500
3. Categories of expenditures Dmitri and Frances Doherty live in Conshohocken, PA. Their son, Jake, owns his own plumbing business. For each of the following transactions that occur in their lives, identify whether it is included in the calculation of U.S. GDP as part of consumption (C), investment (1), government purchases (G), exports (X), or imports (M). Check all that apply. Transaction Dmitri's employer assigns him to provide consulting services to an Australian firm that's opening a manufacturing facility in China. The Pennsylvania Department of Transportation, a state administration, fixes potholes along PA highway: 23, which feeds into the center of Conshohocken, Frances gets a new video camera made in the United States. Dmitri buys a sweater made in Guatemala. Jake buys a new set of tools to use in his plumbing business. с 00 I O O G O X 0 M O O 0 000 00 000 000
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10:35 PM A O 60 Aggregate Expenditures Schedule 50 Tools 40 C+1 Equilibrium 30 20 10 10 20 30 40 50 Real GDP (billions of dollars) Instructions: In part b, enter your answer as a whole number. In part c, round your answer to 1 decimal place. b. What is the equilibrium GDP for this country? billion c. What is the marginal propensity to consume for this country? Aggregate expenditures (billions of dollars)
Briefly discuss the following concepts iv. Government expenditure multiplierv. Potential output
3. Categories of expenditures Shen and Valerie Ferrari live in Swarthmore, PA. Valerie's father, Antonio, lives in Sweden. For each of the following transactions that occur in their lives, identify whether it is included in the calculation of U.S. GDP as part of consumption (C), investment (I), government purchases (G), exports (X), or imports (M). Check all that apply. Transaction Shen's employer upgrades all of its computer systems using U.S.-made parts. Valerie gets a new video camera made in the United States. The state of Pennsylvania repaves highway PA 320, which goes through the center of Swarthmore. Valerie's father in Sweden orders a bottle of Vermont maple syrup from the producer's website. Shen buys a bottle of Italian wine. OOOoo 0 I 00000 G 00 000 X 00000 M OC 0 0 0 0
How would I do D?
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 6 Refer to the table. If the full-employment real GDP is $100, the: Consumption (after taxes) $-20 Real GDP Government Purchases $15 Gross Investment Net Exports $0 $10 $+5 10 10 +5 15 40 20 10 +5 15 70 40 10 +5 15 60 80 100 inflationary expenditure gap is $30. 100 10 +5 15 130 10 +5 15 160 10 +5 15 inflationary expenditure gap is $10. recessionary expenditure gap is $30. recessionary expenditure gap is $10. O hyper recessionary expenditure gap is $100. O O O C
d. What is the value of the multiplier? e. If planned investment spending falls to $200 billion, what will be the new Y*? f. If autonomous consumer spending rises to $200 bil- lion, what will be the new Y*?
2. The consumption function Consider a country with the national income of $12 billion, the amount of taxes paid by households of $3 billion, and household consumption of $7 billion. Suppose that the marginal propensity to consume (MPC) is 0.75. On the following graph, use the blue line (circle symbol) to plot the economy's consumption function. Hint: You should plot the first point where household consumption equals $7 billion. Then, plot the second point when real disposable income rises by $4 billion. REAL CONSUMPTION (Billions of dollars) 20 18 16 + 14 12 10 0 0 2 4 6 8 10 12 14 16 18 20 REAL DISPOSABLE INCOME (Billions of dollars) -0 O $7.75 billion O $9.75 billion O $7.5 billion O $10.75 billion Consumption Function (?) Suppose now that country's national income increases to $13 billion. Assuming the amount paid in taxes is fixed at $3 billion and MPC= 0.75, what will be the new household consumption?
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