Consider an economy in which investment is $200, government purchases are $500, net exports are $30, and the price level is fixed. Taxes vary with income, and as a result, the consumption schedule looks like that shown in the following table. Fill in the missing values. Graph the aggregate expenditure graph using the above data. This is the graph with Aggregate Expenditures on the Y axis and Real GDP on the x axis. Start with a forty five degree line. Suppose that full employment comes at GDP=$1,480. Is the economy in an inflationary or recessionary gap? What action would you take to close the gap? I am looking for the amount you would cut/increase taxes or decrease/increase government spending.
Consider an economy in which investment is $200, government purchases are $500, net exports are $30, and the price level is fixed. Taxes vary with income, and as a result, the consumption schedule looks like that shown in the following table. Fill in the missing values. Graph the aggregate expenditure graph using the above data. This is the graph with Aggregate Expenditures on the Y axis and Real GDP on the x axis. Start with a forty five degree line. Suppose that full employment comes at GDP=$1,480. Is the economy in an inflationary or recessionary gap? What action would you take to close the gap? I am looking for the amount you would cut/increase taxes or decrease/increase government spending.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Consider an economy in which investment is $200, government purchases are $500, net exports are $30, and the price level is fixed. Taxes vary with income, and as a result, the consumption schedule looks like that shown in the following table. Fill in the missing values.
Graph the aggregate expenditure graph using the above data. This is the graph with Aggregate Expenditures on the Y axis and Real GDP on the x axis. Start with a forty five degree line.
Suppose that full employment comes at GDP=$1,480.
Is the economy in an inflationary or recessionary gap?
What action would you take to close the gap?
I am looking for the amount you would cut/increase taxes or decrease/increase government spending.
Transcribed Image Text:Total Real
(Х-
IM)
Expenditure
(TE)
GDP
Тахes
DI
C
I
G
1,360
320
1,040
810
200
500
30
1,480
360
1,120
870
200
500
30
1,600
400
1,200
930
200
500
30
1,720
440
1,280
990
200
500
30
1,840
480
1,360
1,050
200
500
30
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