Refer to the accompanying table in answering the questions that follow: (3) Aggregate Expenditures (Ca + Ig + Xn + G), Billions $ 520 (1) Possible Levels of (2) Real Domestic Output, Billions $ 500 Employment, Millions 70 90 550 560 110 600 600 130 650 640 150 700 680 Instructions: In parts a-c, enter your answers for the multiplier as a whole number. In part c, round your answers for the MPC and MPS to 1 decimal place. a. If full employment in this economy is 150 million, will there be an inflationary expenditure gap or a recessionary expenditure gap? (Click to select) What will be the consequence of this gap? (Click to select) By how much would aggregate expenditures in column 3 have to change at each level of GDP to eliminate the gap? Aggregate expenditures would have to (Click to select) v by $ billion. What is the multiplier in this example? b. Will there be an inflationary expenditure gap or a recessionary expenditure gap if the full-employment level of output is $500 billion? (Click to select) By how much would aggregate expenditures in column 3 have to change at each level of GDP to eliminate the gap? Aggregate expenditures would have to (Click to select) v by $ billion. What is the multiplier in this example? C. Assuming that investment, net exports, and government expenditures do not change with changes in real GDP, what are the sizes of the MPC, the MPS, and the multiplier? MPC = MPS =
Refer to the accompanying table in answering the questions that follow: (3) Aggregate Expenditures (Ca + Ig + Xn + G), Billions $ 520 (1) Possible Levels of (2) Real Domestic Output, Billions $ 500 Employment, Millions 70 90 550 560 110 600 600 130 650 640 150 700 680 Instructions: In parts a-c, enter your answers for the multiplier as a whole number. In part c, round your answers for the MPC and MPS to 1 decimal place. a. If full employment in this economy is 150 million, will there be an inflationary expenditure gap or a recessionary expenditure gap? (Click to select) What will be the consequence of this gap? (Click to select) By how much would aggregate expenditures in column 3 have to change at each level of GDP to eliminate the gap? Aggregate expenditures would have to (Click to select) v by $ billion. What is the multiplier in this example? b. Will there be an inflationary expenditure gap or a recessionary expenditure gap if the full-employment level of output is $500 billion? (Click to select) By how much would aggregate expenditures in column 3 have to change at each level of GDP to eliminate the gap? Aggregate expenditures would have to (Click to select) v by $ billion. What is the multiplier in this example? C. Assuming that investment, net exports, and government expenditures do not change with changes in real GDP, what are the sizes of the MPC, the MPS, and the multiplier? MPC = MPS =
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
Transcribed Image Text:Refer to the accompanying table in answering the questions that follow:
(3) Aggregate Expenditures (Ca
+ Ig + Xn + G), Billions
$ 520
(1) Possible Levels of
(2) Real Domestic
Output, Billions
$ 500
Employment, Millions
70
90
550
560
110
600
600
130
650
640
150
700
680
Instructions: In parts a-c, enter your answers for the multiplier as a whole number. In part c, round your answers for the
MPC and MPS to 1 decimal place.
a. If full employment in this economy is 150 million, will there be an inflationary expenditure gap or a recessionary
expenditure gap?
(Click to select)
What will be the consequence of this gap?
(Click to select)
By how much would aggregate expenditures in column 3 have to change at each level of GDP to eliminate the gap?
Aggregate expenditures would have to (Click to select) v by $
billion.
What is the multiplier in this example?
b. Will there be an inflationary expenditure gap or a recessionary expenditure gap if the full-employment level of output is
$500 billion?
(Click to select)
By how much would aggregate expenditures in column 3 have to change at each level of GDP to eliminate the gap?
Aggregate expenditures would have to (Click to select) v by $
billion.
What is the multiplier in this example?
C. Assuming that investment, net exports, and government expenditures do not change with changes in real GDP, what are
the sizes of the MPC, the MPS, and the multiplier?
MPC =
MPS =
Expert Solution
Step 1
Recessionary gap exists when the aggregate expenditure is less than the real output at full employment level in an economy
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