An economy is described by the following equations: = 2,000 + 0.5 (Y - T) = 900 IP G = 1,800 NX = 100 T 1,800 8,200 Y* = a. Find a numerical equation linking planned aggregate expenditure to output. Instructions: Round the value for mpc to one decimal place. PAE= Y b. Find autonomous expenditure and induced expenditure in this economy. Instructions: Round the value for mpc to one decimal place. Autonomous expenditure: Induced expenditure: Y

An economy is described by the following equations: = 2,000 + 0.5 (Y - T) = 900 IP G = 1,800 NX = 100 T 1,800 8,200 Y* = a. Find a numerical equation linking planned aggregate expenditure to output. Instructions: Round the value for mpc to one decimal place. PAE= Y b. Find autonomous expenditure and induced expenditure in this economy. Instructions: Round the value for mpc to one decimal place. Autonomous expenditure: Induced expenditure: Y

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Consider the aggregate expenditure model. Suppose there is an increase in real GDP in the economy. Classify each economic variable as to whether it increases, decreases, or remains unchanged when real GDP increases. Increases Decreases Answer Bank Does not change consumption marginal propensity to consume government spending investment aggregate expenditures net exports imports natural rate of output exports
If the output level is such that the Y=AE line (45-degree line) is below the aggregate expenditure line, which of the following is true? a Aggregate expenditure is greater than output, so inventories will decrease and output will increase. b Aggregate expenditure is less than output, so inventories will increase and output will decrease. c Aggregate expenditure is less than output, so inventories will decrease and output will increase. d Aggregate expenditure is greater than output, so inventories will increase and output will decrease.
Refer to Table 1. The equation for the aggregate consumption function is C = 200 + 0.3Y. C = -200 + 0.2Y. C = 200 + 0.8Y. C = 200 + 0.75Y.
Real aggregate expenditure, AE (trillions of dollars) 0 45° Y=AE AE Real GDP, Y (trillions of dollars) Refer to Figure 23-1. If the economy is at point L, what will happen? Inventories have fallen below their desired level, and firms decrease production. Inventories have risen above their desired level, and firms decrease production. Inventories have fallen below their desired level, and firms increase production. Inventories have risen above their desired level, and firms increase production.
Consider the following planned aggregate expenditure function: AEp=1000+0.8Y 1. Calculate the income-expenditure equilibrim real GDP, Y*, for this economy. Illustrate the equilibrium real GDP on a diagram below. Label the equilibrium point E. 2. Explain how an increase in uncertainty due to the collapse of multiple banks in the economy affects consumption and firm investment spending. Also explain what effect these changes would have on AEp and Y*. Show the effect on your diagram in part 1. 3. Suppose following the events above consumption and investment spending change by 220. By how much would Y* change eventually? Calculate and explain. 4. If the federal government wants to get the economy back at producing Y* you found in part 1 by adjusting its purchases of goods and services (G) by how much would it have to change G? (Hint: use the multiplier to calculate).
In an economy, as per the aggregate income identity : Y=C+I+G+X−M. Assuming the following relations exist and values given, show your working to compute the value of the multiplier: C=c0+c1(1−t)Y I=a0−a1r G=g0−g1Y X=x0 M= m0+m1Y c0=3.71, c1= 0.55, t= 0.78, a0= 4.83, a1= 0.57, g0= 9.31, g1= 0.05, x0= 2.46, m0= 6.19 and m1= 0.3
Firms in a small economy planned that inventories would grow over the past year by $300,000. Over that year, inventories actually grew by $400,000. This implies that a) planned aggregate expenditure that year was equal to GDP that year. b) planned aggregate expenditure that year was less than GDP that year. c) consumer spending grew faster than expected. d) there was a planned decrease in inventories that year. e) there was an unplanned decrease in inventories that year.