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A. The accompanying table shows gross domestic income product (GDP), disposable income (YD), consumer spending (C), and planned investment spending (I manned) in an economy. Assume there is no government or foreign sector in this economy. Complete the table by calculating planned aggregate spending (AEpoet) and unplanned inventory investment (I unplanned). (10 points)(show work and ANSWER ALL PARTS) GDP YO C Iplanned AE planned I Unplanned (billions of dollars) $0 $0 $100 $300 400 400 400 300 800 800 700 300 1,200 1,200 1,000 300 1,600 1,600 1,300 300 2,000 2,000 1,600 300 2,400 2,400 1,900 300 2,800 2,800 2,200 300 3,200 3,200 2,500 300 B. What is the aggregate consumption function? (10 points) C. What is Y*, income-expenditure equilibrium GDP? Explain why. (10 points) D. What is the value of the multiplier? (5 points) E. If planned investment spending falls to $200 billion, what will be the new Y*? (10 points) F. If autonomous consumer spending rises to $200 billion, what will be the new Y* 7(10 points Note: Show all of your work including calculations. Unit 11: The Effect of a Change in Spending on GDP Assuming that the aggregate price level is constant, the interest rate is fixed, and there are no taxes and no foreign trade, what will be the change in GDP if the following events occur? A. There is an autonomous increase in consumer spending of $25 billion; the marginal propensity to consume is 2/3. (5 points) B. Firms reduce investment spending by $40 billion; the marginal propensity to con- sume is 0.8. (5 points) C. The government increases its purchases of military equipment by $60 billion; the marginal propensity to consume is 0.6. (5 points)

A. The accompanying table shows gross domestic income product (GDP), disposable income (YD), consumer spending (C), and planned investment spending (I manned) in an economy. Assume there is no government or foreign sector in this economy. Complete the table by calculating planned aggregate spending (AEpoet) and unplanned inventory investment (I unplanned). (10 points)(show work and ANSWER ALL PARTS) GDP YO C Iplanned AE planned I Unplanned (billions of dollars) $0 $0 $100 $300 400 400 400 300 800 800 700 300 1,200 1,200 1,000 300 1,600 1,600 1,300 300 2,000 2,000 1,600 300 2,400 2,400 1,900 300 2,800 2,800 2,200 300 3,200 3,200 2,500 300 B. What is the aggregate consumption function? (10 points) C. What is Y*, income-expenditure equilibrium GDP? Explain why. (10 points) D. What is the value of the multiplier? (5 points) E. If planned investment spending falls to $200 billion, what will be the new Y*? (10 points) F. If autonomous consumer spending rises to $200 billion, what will be the new Y* 7(10 points Note: Show all of your work including calculations. Unit 11: The Effect of a Change in Spending on GDP Assuming that the aggregate price level is constant, the interest rate is fixed, and there are no taxes and no foreign trade, what will be the change in GDP if the following events occur? A. There is an autonomous increase in consumer spending of $25 billion; the marginal propensity to consume is 2/3. (5 points) B. Firms reduce investment spending by $40 billion; the marginal propensity to con- sume is 0.8. (5 points) C. The government increases its purchases of military equipment by $60 billion; the marginal propensity to consume is 0.6. (5 points)

Macroeconomics: Private and Public Choice (MindTap Course List)
Macroeconomics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506756
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter7: Taking The Nation's Economic Pulse
Section: Chapter Questions
Problem 4CQ
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A. The accompanying table shows gross domestic income product (GDP), disposable income (YD), consumer spending (C), and planned investment spending (I manned) in an economy. Assume there is no government or foreign sector in this economy. Complete the table by calculating planned aggregate spending (AEpoet) and unplanned inventory investment (I unplanned). (10 points)(show work and ANSWER ALL PARTS) GDP YO C Iplanned AE planned I Unplanned (billions of dollars) $0 $0 $100 $300 400 400 400 300 800 800 700 300 1,200 1,200 1,000 300 1,600 1,600 1,300 300 2,000 2,000 1,600 300 2,400 2,400 1,900 300 2,800 2,800 2,200 300 3,200 3,200 2,500 300 B. What is the aggregate consumption function? (10 points) C. What is Y*, income-expenditure equilibrium GDP? Explain why. (10 points) D. What is the value of the multiplier? (5 points) E. If planned investment spending falls to $200 billion, what will be the new Y*? (10 points) F. If autonomous consumer spending rises to $200 billion, what will be the new Y* 7(10 points Note: Show all of your work including calculations. Unit 11: The Effect of a Change in Spending on GDP Assuming that the aggregate price level is constant, the interest rate is fixed, and there are no taxes and no foreign trade, what will be the change in GDP if the following events occur? A. There is an autonomous increase in consumer spending of $25 billion; the marginal propensity to consume is 2/3. (5 points) B. Firms reduce investment spending by $40 billion; the marginal propensity to con- sume is 0.8. (5 points) C. The government increases its purchases of military equipment by $60 billion; the marginal propensity to consume is 0.6. (5 points)
Transcribed Image Text:A. The accompanying table shows gross domestic income product (GDP), disposable income (YD), consumer spending (C), and planned investment spending (I manned) in an economy. Assume there is no government or foreign sector in this economy. Complete the table by calculating planned aggregate spending (AEpoet) and unplanned inventory investment (I unplanned). (10 points)(show work and ANSWER ALL PARTS) GDP YO C Iplanned AE planned I Unplanned (billions of dollars) $0 $0 $100 $300 400 400 400 300 800 800 700 300 1,200 1,200 1,000 300 1,600 1,600 1,300 300 2,000 2,000 1,600 300 2,400 2,400 1,900 300 2,800 2,800 2,200 300 3,200 3,200 2,500 300 B. What is the aggregate consumption function? (10 points) C. What is Y*, income-expenditure equilibrium GDP? Explain why. (10 points) D. What is the value of the multiplier? (5 points) E. If planned investment spending falls to $200 billion, what will be the new Y*? (10 points) F. If autonomous consumer spending rises to $200 billion, what will be the new Y* 7(10 points Note: Show all of your work including calculations. Unit 11: The Effect of a Change in Spending on GDP Assuming that the aggregate price level is constant, the interest rate is fixed, and there are no taxes and no foreign trade, what will be the change in GDP if the following events occur? A. There is an autonomous increase in consumer spending of $25 billion; the marginal propensity to consume is 2/3. (5 points) B. Firms reduce investment spending by $40 billion; the marginal propensity to con- sume is 0.8. (5 points) C. The government increases its purchases of military equipment by $60 billion; the marginal propensity to consume is 0.6. (5 points)
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