An economy with no government is described by the following: • Marginal propensity to consumer = 0.8 • Marginal propensity to import = 0.2 • Autonomous expenditure = 500 • Potential GDP = 1500 1. The aggregate expenditure function is thus AE 500 0.6 2. The multiplier is 1 3. Equilibrium GDP is Y 1250 %3D 4. The output gap is 5. There is a output gap.
An economy with no government is described by the following: • Marginal propensity to consumer = 0.8 • Marginal propensity to import = 0.2 • Autonomous expenditure = 500 • Potential GDP = 1500 1. The aggregate expenditure function is thus AE 500 0.6 2. The multiplier is 1 3. Equilibrium GDP is Y 1250 %3D 4. The output gap is 5. There is a output gap.
Chapter9: The Keynesian Model In Action
Section: Chapter Questions
Problem 5SQP
Related questions
Question
I need help with 4 and 5
![1. The aggregate expenditure function is thus AE
500
0.6
Y.
2. The multiplier is
1
3. Equilibrium GDP is Y =
1250
4. The output gap is
5. There is a
+ output gap.
Suppose now a
recessionary
blished:
• Tax rate
12 inflationary
• Government
no](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F868b8534-4d89-4d63-908b-b662dc9aeef4%2F7b7c8ee6-b1a6-4da7-baeb-524d9c43112e%2Fpd0dupk_processed.jpeg&w=3840&q=75)
Transcribed Image Text:1. The aggregate expenditure function is thus AE
500
0.6
Y.
2. The multiplier is
1
3. Equilibrium GDP is Y =
1250
4. The output gap is
5. There is a
+ output gap.
Suppose now a
recessionary
blished:
• Tax rate
12 inflationary
• Government
no
![An economy with no government is described by the following:
• Marginal propensity to consumer = 0.8
• Marginal propensity to import = 0.2
• Autonomous expenditure 500
• Potential GDP = 1500
!!
1. The aggregate expenditure function is thus AE
500
0.6
2. The multiplier is
1
3. Equilibrium GDP is Y
1250
4. The output gap is
5. There is a
output gap.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F868b8534-4d89-4d63-908b-b662dc9aeef4%2F7b7c8ee6-b1a6-4da7-baeb-524d9c43112e%2Fpqm9h0d_processed.jpeg&w=3840&q=75)
Transcribed Image Text:An economy with no government is described by the following:
• Marginal propensity to consumer = 0.8
• Marginal propensity to import = 0.2
• Autonomous expenditure 500
• Potential GDP = 1500
!!
1. The aggregate expenditure function is thus AE
500
0.6
2. The multiplier is
1
3. Equilibrium GDP is Y
1250
4. The output gap is
5. There is a
output gap.
Expert Solution
![](/static/compass_v2/shared-icons/check-mark.png)
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
![MACROECONOMICS FOR TODAY](https://www.bartleby.com/isbn_cover_images/9781337613057/9781337613057_smallCoverImage.gif)
![Economics For Today](https://www.bartleby.com/isbn_cover_images/9781337613040/9781337613040_smallCoverImage.gif)
![MACROECONOMICS FOR TODAY](https://www.bartleby.com/isbn_cover_images/9781337613057/9781337613057_smallCoverImage.gif)
![Economics For Today](https://www.bartleby.com/isbn_cover_images/9781337613040/9781337613040_smallCoverImage.gif)