An economy is described by the following equations:C= 60 +0.75 (Y - T)IP= 100G= 150NX= 30T= 180Y*= 760The multiplier in this economy is 4.a. Find a numerical equation relating planned aggregate expenditure to output.Instructions: Enter your response for mpc rounded to two decimal places.PAE=b. Construct a table to find the value of short-run equilibrium output.Instructions: If you are entering any negative numbers be sure to include a negative sign (-) in front of those numbers.Planned aggregateOutput Yexpenditure (PAE)Y - PAE6207208209201,020Short-run equilibrium output isc. By how much would government purchases have to change in order to eliminate any output gap? By how much would taxes have tochange?In order to eliminate any output gap, government purchases would have to be reducedbyIn order to eliminate any output gap, taxes would have to be increasedbyd. If Y*=856, then by how much would government purchases have to change in order to eliminate any output gap? By how muchwould taxes have to change?In order to eliminate any output gap, government purchases would have to be increasedIn order to eliminate any output gap, taxes would have to be reduced* by* by

The objective of the question is to find the numerical equation relating planned aggregate…

Answered: An economy is described by the…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The accompanying graph represents the Keynesian cross for a country, where the planned aggregate spending line (Planned AE) is graphed against a 45° line. Suppose that there is an autonomous decrease in aggregate spending of $40 billion in this country. a. Show this change on the graph (you can drag and shift the whole line or either of the endpoints) and answer the following two questions. b. What is the initial unplanned inventory investment? If the number is negative, be sure to include a negative sign. billion dollars c. After firms adjust their production, what is the total change in real GDP? If the number is negative, be sure to include a negative sign. following two questions. vay and answer the b. What is the initial unplanned inventory investment? If the number is negative, be sure to include a negative sign. billion dollars c. After firms adjust their production, what is the total change in real GDP? If the number is negative, be sure to include a negative sign. billion…
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We again assume asimple closed economy with GDP of 100 and:c0(autonomous consumption) = 20c1 (marginal propensity to consume) = 0.6I (investment) = 20.a) Now assume that c0falls by 5 (i.e. 5% of GDP), i.e. for any given level of output,consumption will fall by 5. Show the implied fall in the AD function in yourdiagram and show that output will fall by more than 5.b) Show that the multiplier is equal to 2.5, and hence that, in the new equilibrium,output will have fallen by 12.5 (i.e. by 12.5%)c) How big would the impact be if, say, c1 = 0.4 or c1 = 0.8? Explain the difference.
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Is the relationship between changes in spending and changes in real GDP in the multiplier effect a direction (positive) relationship or is it an inverse (negative) relation- ship?
New help with D, E, F, G
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
Suppose we start with a general equilibrium, and the economy experience an improvement in payment technology. Which of the following statements correctly describes the goods market response in the short term? 1. The IS curve remains unchanged 2. The IS curve shifts to the left 3. The IS curve shifts to the right 4. None of the above
Problem 1 Suppose the system of aggregate expenditures can be described by the following relationships and parameter values. C(Y – T) = 1200 + 0.8(Y – T) I(r) = 100 – 3r G = 200;T = 200; r = 5; Ex = Im = 0 1. In the consumption function, 1200 represents the portion of consumption that is not dependent on disposable income. Suppose something causes households to become concerned about their economic futures and this autonomous consumption falls to 1100. Find the new equilibrium level of Y (output/income).
What is the multiplier effect? The multiplier is simply the ratio of the change in (r spending. Multiplying the initial change in spending by the multiplier gives you the amount of change in real GDP. G ) to the initial change in The multiplier effect can work in a positive or a negative direction. An initial increase in spending will result in a (smaller, larger) increase in real GDP, and an initial decrease in spending will result in a larger (increase, decrease ) in real GDP. The multiplier magnifies the fluctuations in economic activity initiated by changes in investment spending, net exports, government spending, or consumption spending. The multiplier is related to the marginal propensities. The MPC is (directly, inversely ) related to the size of the multiplier. The MPS is (directly, inversely ) related to the size of the multiplier. What will multiplier and MPS be when the MPC is .9, and 0.5? MPC MPS Multiplier .9 .5 How much of a change in GDP will result if firms increase…
Question 2 Refer to the information provided in Figure 23.9 below to answer the question(s) that follow. Aggregate expenditures ($ millions) 225 200 175 150 45° AE 100 200 300 Aggregate output ($ millions) Figure 23.9 a) Refer to Figure 23.9. Write the equation for the aggregate expenditure function (AE). Show your work. b) Refer to Figure 23.9. What is the equilibrium level of output in this economy? State the equilibrium condition used to determine this. c) Explain the forces that maintain/drive the economy to this equilibrium by considering what will happen at the following two levels of output, $300 million and $100 million. You will need to discuss changes in investment through unplanned inventories and the response of output. d) Refer to Figure 23.9. How will equilibrium aggregate expenditure and equilibrium aggregate output change as a result of a decrease in investment by $20 million? e)The interest rate is an exogenous factor that effects the level of investment in an economy.…
Consider the macroeconomic model shown below: C 150+0.50Y | = 100 G = 100 NX = 25 Y=C+I+G+ NX Consumption function Planned investment function Government spending function Net export function Equilibrium condition Fill in the following table. (Round your responses to the nearest dollar.) GDP $375 Aggregate Expenditures (AE) Unplanned Change in Inventories $1,125

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