An economy is described by the following equations:Desired consumption Cd = 300 + 0.5(Y – T) – 300r.Desired investment jd.= 100 - 100r.Y=Government purchases G = 250.Taxes T = 100.Real money demand L = 0.5Y - 200r.Money supply M = 6,200.Full-employment output = 700.a. Write the equation for the aggregate demand curve. (Hint: Find the equations describing the goods market and assetmarket equilibria. Use these two equations to eliminate the real interest rate. For any given price level, the equation ofthe aggregate demand curve gives the level of output that satisfies both goods market and asset market equilibria.)+ (IP) (enter your response rounded to one decimal place).

An aggregate demand curve shows the inverse relationship between price level (P) and output (Y).An…

An economy is described by the following equations: cd= 300+ 0.5(YT) - 300r. Desired consumption Desired investment /d = 100 - 100r. Government purchases G = 250. Taxes T = 100. Real money demand L = 0.5Y - 200r. Money supply M = 6,200. Full-employment output = 700.

An economy is described by the following equations: cd= 300+ 0.5(YT) - 300r. Desired consumption Desired investment /d = 100 - 100r. Government purchases G = 250. Taxes T = 100. Real money demand L = 0.5Y - 200r. Money supply M = 6,200. Full-employment output = 700.

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter10: Bringing In The Supply Side: Unemployment And Inflation?

Section: Chapter Questions

Problem 3TY

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1. Let us say the estimated equation for the economy's aggregate demand is Y=400 – 15P+ 8G And the estimated equation for the economy's aggregate supply is Y=5+11P-10W where Y is the country's real GDP, P is the price level (GDP deflator), G is government purchases of goods and services, and W is the index of wages. a. If G= 160 and W= 100, find the equilibrium real GDP and the price level in the economy. b. What is the simple multiplier in this economy? Give the number and explain how you figured it out. c. What is the inflation rate due to the government increasing its purchases from G=160 to G= 180 (expansionary fiscal policy), in %? d. What is the value of the multiplier when the price level varies? 2. Imagine an economy in which the slope of the AD curve is equal to the (negative of) slope of the AS curve. If the simple multiplier is equal to 5, what is the value of the multiplier when the price level varies? Give the number and explain how you figured it out.
Consider an economy having following values of Consumption, Investment, Government pending, and Taxes. C = 200 + 0.7Yd I = 300 G= 500 T = 150 Derive the aggregate demand equation. Also, calculate the output in an economy.
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For this problem, you will analyze the following component of GDP: ... O ...consumption [variant 1]... O ...investment [variant 2]... O ...net exports [variant 3]... ...measured in real terms. a) Describe in detail how inflation affects this component of GDP. What is the name of the effect through which this component is affected by inflation? b) The aggregate-demand curve shifted to the left. Suggest two possible events related to this GDP component that could have contributed to this shift. c) Suggest a policy the government can introduce or eliminate to stimulate aggregate demand through this GDP component. d) On the graph below [excluded]: Label the axes. ● Graph the aggregate-demand curve, the long-run aggregate-supply curve, and the short-run aggregate-supply curve. Make sure you label them. Graph the shift of the aggregate-demand curve to the left and label the new curve. Show what will happen if the government introduces the policy you suggested in part (c). Assume the policy…
Consider an economy having following values of Consumption, Investment, Government Spending, and Taxes, C = 300 + 0.7Yd I = 200 – 200i G = 600 T = 100 Derive the aggregate demand equation. Also, calculate the output in an economy.
Real aggregate expenditure, AE (trillions of 2000 dollars) 0 45° Figure 2-2 N A) government expenditures increase. C) the firm's cash flow rises as profits rise. Y = AE AE₂ AE₁ Real GDP, Y (trillions of 2000 dollars) 17) Refer to Figure 2-2. If the U.S. economy is currently at point N, which of the following could cause it to move to point K? B) corporate taxes increase. D) household wealth rises.
In this aggregate demand model, which one of the following statements correctly describes the economy if it is at point Y on the diagram? 1 - The economy is at the full employment equilibrium 2- There are forces that are tending to make income (output) fall. 3-There are forces that are tending to make income (output) rise. 4-The economy is in equilibrium at less than full employment.
Part B: Aggregate Demand (AD) Curve shows the relationship between the economy’s price level and real GDP demanded. In other words, real GDP demanded by different groups of buyers, i.e., Consumers (C), Businesses (I), Government (G), and Net Amount by Foreigners (Export - Import), at different price levels give us points on a graph, which are connected to form a curve called AD curve. Review the textbook chapter, and conduct internet research to discuss determinants of AD or factors that shift AD curve.
Part B: Aggregate Demand (AD) Curve shows the relationship between the economy’s price level and real GDP demanded. In other words, real GDP demanded by different groups of buyers, i.e., Consumers (C), Businesses (I), Government (G), and Net Amount by Foreigners (Export - Import), at different price levels give us points on a graph, which are connected to form a curve called AD curve. Review the textbook chapter, and conduct internet research to discuss determinants of AD or factors that shift AD curve.
An economy’s aggregate demand is specified as follows:C = 300 + 0.8Yd, Investment (Io) = 230, Taxes (T) = 120 + 0.2Y, Government final purchase = 400, Export (X) =240 and Import (M) = 400.i. Find the equilibrium national incomeii. Find the value of the injections in this economyiii. How much withdrawals are when the economy is in equilibrium
Which of the following explain why the Aggregate Demand Curve slopes downward? Mark all that apply. Select 4 correct answer(s) Question 10 options: When the price level rises, the interest rate will rise, reducing Investment Spending. When the price level falls, the interest rate will fall, increasing Investment Spending. When the price level rises, the purchasing power of money declines and Consumption Spending will decline. When the price level falls, the purchasing power of money declines and Consumption Spending will decline. When the domestic price level rises, imports become relatively more expensive and Net Exports increase. When the domestic price level falls, imports become relatively more expensive and exports become less expensive, resulting in an increase in Net Exports.