a. If full employment in this economy is 130 million, will there be an inflationary expenditure gap or a recessionary expenditure gap? (Click to select) What will be the consequence of this gap? (Click to select) By how much would aggregate expenditures in column 3 have to change at each level of GDP to eliminate the gap? Aggregate expenditures would have to (Click to select) ♥] by $ |billion. What is the multiplier in this example? b. Will there be an inflationary expenditure gap or a recessionary expenditure gap if the full-employment level of output is $450 billion? (Click to select) By how much would aggregate expenditures in column 3 have to change at each level of GDP to eliminate the gap? Aggregate expenditures would have to (Click to select) ♥ by $ billion. What is the multiplier in this example? c. Assuming that investment, net exports, and government expenditures do not change with changes in real GDP, what are the sizes of the MPC, the MPS, and the multiplier? MPC =| MPS = Multiplier =

a. If full employment in this economy is 130 million, will there be an inflationary expenditure gap or a recessionary expenditure gap? (Click to select) What will be the consequence of this gap? (Click to select) By how much would aggregate expenditures in column 3 have to change at each level of GDP to eliminate the gap? Aggregate expenditures would have to (Click to select) ♥] by $ |billion. What is the multiplier in this example? b. Will there be an inflationary expenditure gap or a recessionary expenditure gap if the full-employment level of output is $450 billion? (Click to select) By how much would aggregate expenditures in column 3 have to change at each level of GDP to eliminate the gap? Aggregate expenditures would have to (Click to select) ♥ by $ billion. What is the multiplier in this example? c. Assuming that investment, net exports, and government expenditures do not change with changes in real GDP, what are the sizes of the MPC, the MPS, and the multiplier? MPC =| MPS = Multiplier =

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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4. a) Draw a TP-TE (or Keynesian cross) graph for South Africa. Suppose Real GDP is $425 billion while the Real GDP where TE=TP is $475 billions. total, Expenditure (billions) TE-TH HEL th I 1 45 425 Q2 475 Q1 TP - TE total Production (billions) b) If Real GDP is $425 billion, what will happen to inventories, to firm's production and to the Real GDP? Inventories will decrease and Production will increase GDP increases to $475 billion and real
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?
Homework: Demand-Side Equilibrium: Unemployment or Inflation? The following graph shows the total expenditure line (TE) for an economy where current equilibrium output is $400 billion and potential output is $650 billion. REAL EXPENDITURE (Billions of dollars) § 2 600 500 400 300 200 100 0 0 100 45-degree ling 200 300 400 500 600 REAL GDP (Bilions of dollars) The economy is experiencing TE Potential GDP 700 800 TE equal to $ by billion. Thus, the value of the multiplier for this economy is billion. To close the output gap, government purchases could On the previous graph, shift the TE line to show the change in total expenditure necessary to close the output gap. Note: Select and drag the curve to the desired position. The curve will snap into position, so if you try to move a curve and it snaps back to its original position, just drag it a little farther.
Question 19 The expenditure line O is steeper than the 45-degree line. O slopes upward because consumption depends positively on income. O slopes upward because the MPC is less than 1. slopes upward because consumption and investment depend positively on income. O shows the relationship between consumption spending and income. D Question 20 Between December 2007 and June 2009, the United States economy was in recession and millions of jobs were lost. the United States economy moved upward and millions of jobs were created. the United States economy grew, but not many jobs were created. the United States economy moved downward, but still many jobs were created. the United States economy remained stationary.
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Explain why the multiplier effect of an increase in consumption spending of $100 billion is larger or smaller than the effect of a tax decrease of $100 billion. (Do not just say the spending multiplier is larger or smaller. Explain why.)
Economics
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
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