(a) Suppose the price level in an economy rises while the money wage rate remains constant. What happens to the quantity of real GDP supplied. How will this affect the aggregate supply or aggregate demand curve? What if the potential GDP increases? Which aggregate curve is affected and how? (b) Real GDP Consumption Planned Investment Government Purchases Net Exports $1,000 $1,000 $100 $150 -$50 2,000 1,900 100 150 -50 3,000 2,800 100 150 -50 4,000 3,700 100 150 -50 From the table data provided, answer the following questions. The numbers in the table are in billions of dollars. Show all calculations. a. What is the equilibrium level of real GDP? b. What is the Marginal Propensity to Consume? c. What is the multiplier value in this economy? d. If potential GDP is $4,000 billion, is the economy at full employment? If not, what is the condition of the economy? e. If the economy is not at full employment, by how much should government spending increase so that the economy can move to the full employment level of GDP?
(a) Suppose the price level in an economy rises while the money wage rate remains constant. What happens to the quantity of real
(b)
Real GDP
Consumption
Planned Investment
Government Purchases
Net Exports
$1,000
$1,000
$100
$150
-$50
2,000
1,900
100
150
-50
3,000
2,800
100
150
-50
4,000
3,700
100
150
-50
From the table data provided, answer the following questions. The numbers in the table are in billions of dollars. Show all calculations.
a. What is the equilibrium level of real GDP?
b. What is the Marginal Propensity to Consume?
c. What is the multiplier value in this economy?
d. If potential GDP is $4,000 billion, is the economy at full employment? If not, what is the condition of the economy?
e. If the economy is not at full employment, by how much should government spending increase so that the economy can move to the full employment level of GDP?
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