An economy is in equilibrium at a real GDP of 750, but current estimates put potential output at Yp = 700.a) Answer the following fill-in the blank question.When Y = 750 and Yp = 700 there is a (Select One) gap and the size of the gap is equal to 0(Select One)inflationaryb) Answer the following fill-in the blank recessionaryNote: Keep as much precision as possible design calculations. Your final answer should be accurate to at least three decimal places.Research suggests that the MPC is 0.8, the MPM is 0.15, and the net tax rate is 0.2. Therefore, the slope of AE isOand the multiplier is 0 which means that G must be decreased by 0 to remove the gapand achieve equilibrium.c) If the government preferred to change its net tax rate to eliminate the gap, and not change government expenditure, what new tax rate would be required to eliminate the gap?Note: Keep as much precision as possible during your calculations. Your final answer should be accurate to at least three decimal places.Tax rate required to eliminate the gap = 0

a)Real GDP = Y = $750Potential GDP = Yp = $700The term output gap refers to the difference between…

Answered: An economy is in equilibrium at a real…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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due to inflationary pressures, the national income of households has been spread across a higher overall price base for goods and services. How will this affect be shown in an AD/ASAD/AS model? a. nearly vertical AS slope at the far right b. a downward sloping AS curve c. nearly horizontal AD curve at the far left d. a downward sloping AD curve
The IS-LM model for a closed economy is given below, where Y is the output, C is the consumption, I is the investment, T is the income tax, Md is the money demand, P is the price level, r is the real interest rate, n is expected inflation rate and G is the government expenditure. C = 200 + 0.8 (Y – T) – 500 r 1 = 200- 500 r %3D T = 20 +0.25 Y %3D Ma = 0.5 Y- 250 (r+n°) If G= 196, n° 0.1, the nominal money supply equals 9890 and the full %3D employment output equals 1000, the full employment equilibrium price level in (in integer) the economy is
State whether the following statement is true or false, and explain why. If the statement is false, state the true change. If the national economy shrank at an annual rate of 4% per year for four consecutive years, then the economy shrank by 16% over the four-year period.
In the 1960s the U.S entered the Vietnam War, and military expenditures (part of government expenditures) grew from an annual rate of $113 billion to 138 billion. The economy was near full-employment and, therefore, given there was no offsetting tax increase, inflation pressures emerged. Assume the MPC is .75 C) With the AD Excess at $150 billion in 1968, what change in taxes would you have recommended? D) How would an increase in income/transfer payments of $150 billion have affected AD ? Have
For the linear IS-LM model, the goods market and the money market are in equilibrium when. Suppose that the economy is characterized by the following equations: (Y;r) = ( 1200 ; 6), Y-C-IG=0, C-Co-c(Y-T)=0,I-Io+hr=0, and kY-ur-M^s=0, which are satisfied for Co=60, lo=150, G=250, T=200, M^s=60, with the parameters c=0.8, k=0.1, h=10, and u=10. How are the equilibrium and affected, a) if "h" (the sensivity of the demand for investment to the interest rate) decreases to 5? b) if "u" (the sensitivity of the demand for real money balances to the interest rate) decreases to 5?
Which statement is CORRECT? Question 3 options: By keeping actual output approximately equal to potential output, a nation's macro-policy makers may risk producing inflation problems. By keeping actual output above potential output, a nation's macro-policy makers can achieve the goal of high output. By keeping actual output approximately equal to potential output, a nation's macro-policy makers may risk producing employment problems. By keeping actual growth rate of output at its maximum pace, a nation's macro-policy makers can achieve the goal of high output. By keeping actual output approximately equal to potential output, a nation's macro-policy makers can achieve the goal of high output.
What does the intersection of the AD and AS curves signify? Contrast the shor-turn aggregate supply (SRAS) curve from the long-run aggregate supply (LRAS) curve. (11.2)
Why did Keynes’s conjectures hold up well in the studies of household data and short time-series, but fail when long time-series were examined?
The growth rate of nominal GDP was 9.4%, and the growth rate of real GDP was 7.4% for Iceland in 2016. Approximately what was the percentage change in prices? %Δprices≈
Egypt authorities faced significant health and economic policy challenges during the COVID19 Pandemic, shutting down certain industries to protect public health. This shutdown resulted in almost 1 million jobs lost in April and May 2020, and a dramatic fall in consumers’ and firms’ confidence to spend and invest. Describe the effect that a fall in confidence had upon output in the Egypt economy using a Keynesian model of the macroeconomy. Ensure that your analysis includes the following:(i) the components of expenditure that are affected and why;(ii) the adjustment process associated with moving from an initial equilibrium (before the onset of the pandemic) to a new equilibrium (after the significant job losses), i.e. the mechanism that leads to a change in output (including a relevant diagram);(iii) an explanation of what the multiplier is and its role in explaining the fall in output; and(iv) a discussion of the policy actions that can restore aggregate demand to its initial level.
Consider the short-term model characterized by the following AS and AD curves: Ý, = à – bm(x, – ñ) (AD] and A; = x; + vỶ, + õ, (AS). The economy is in steady state at time t = -1 (that is, a-1 = ñ, ō-1 = 0, and ā = 0). It is hit by a one-time inflation shock öy = .025 at time i = 0. For now, expectations are adaptive: 7 = ,-1. You'll use the answer to this question in several follow-up questions. To keep track of your results, you should use a spreadsheet application. If you don't already have one, you can use this hyperlinked template e (it's a Google Sheet). Calculate zo assuming b = 0.5, m = 2, ñ = 0.03, and ū = 1. Enter your answer as a percentage and round to the nearest hundredth.
The term potential output refers to: a)The maximum possible output for an economy b)The quantity of output that would be produced if every member of the labor force worked 40 hours per week c)The quantity of output produced when the price level is the same as firms and workers expected when they agreed on input prices and wages d)The quantity of output produced at the intersection of the AD and AS curves

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