Exhibit 19-3 Keynesian aggregate expenditures model 16 14 Real aggregate 12 expenditures 10 8 6 (trillions of dollars per year) 4 2 AE 45° 0 2 4 6 8 10 12 14 16 18 Real GDP (trillions of dollars per year) As shown in Exhibit 19-3, if GDP is S6 trillion, the economy experiences unplanned inventory: a. accumulation of $6 trillion. O b. depletion of $2 trillion. O c. accumulation of $2 trillion. O d. depletion of $6 trillion.

Exhibit 19-3 Keynesian aggregate expenditures model 16 14 Real aggregate 12 expenditures 10 8 6 (trillions of dollars per year) 4 2 AE 45° 0 2 4 6 8 10 12 14 16 18 Real GDP (trillions of dollars per year) As shown in Exhibit 19-3, if GDP is S6 trillion, the economy experiences unplanned inventory: a. accumulation of $6 trillion. O b. depletion of $2 trillion. O c. accumulation of $2 trillion. O d. depletion of $6 trillion.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Related questions

Q: Real GDP is $16 trillion and aggregate planned expenditure is $17 trillion. As a result, unplanned…

A: Real GDP is the value of final goods and services produced in the economy within a given period of…

Q: National Income 100 200 300 400 500 600 O 104 324 374 This is a table for Keynesian cross diagram.…

A: Consumption refers to the use, utilization, or expenditure of goods and services by individuals,…

Q: When potential real GDP is equal to 70, this economy is in The amount of the shortfall in planned…

A: Potential real GDP is the amount of output that an economy can produce using all of its resources…

Q: Suppose the consumption function is C-$700 billion+08Y and the government wants to stimulate the…

A: Aggregate demand refers to the total demand for commodities and services made by all the economic…

Q: Refer to Figure 23-5. Suppose that an increase in government purchases by 50 causes the AD curve to…

A: Given increase in government spending = 50 million The simple multiplier takes account of only the…

Q: Price Level 150 135 120 LRAS AD 9 10 11 Real GDP per Year ($ trillions) Consider the above figure.…

A: The point where LRAS (Long-run aggregate supply curve) intersects the AD curve is known as the…

Q: In the aggregate expenditure model, the assumption of a constant price level implies that OA. the…

A: In the aggregate expenditure model, four components of aggregate expenditure that together equal GDP…

Q: 16. Consider a closed economy with demand for goods as follows: • yd = C +I+ G C = 200 + 0.80(Y – T)…

A: “Since you have posted a question with multiple sub-parts, we will solve first three sub-parts for…

Q: expenditure (trillions of 2005 dollars) Aggregate planned 20 16 12 8 4 45° line AE 8 12 16 20 24…

A: Induced expenditure (IE) is the changes in spending that result from changes in income or economic…

Q: 2. Consider a Keynesian IS-LM model for national income: Y=C(Y-T)+1(r) +G L (r,Y)= M* Given: IS:…

A: The IS-LM model, which means "investment-savings" (IS) and "liquidity preference-money supply" (LM)…

Q: QUESTION 35 AS1 110 A 100 AD2 AD1 900 960 1100 Real GDP FIGURE 23-5 Refer to Figure 23-5. Suppose…

A: a multiplier broadly refers to an economic factor that, when changed, causes changes in many other…

Q: 3. You are given the following data concerning Mexico. - Consumption function: C = 1000+ 0.8Yd - Ya…

A: The consumption function describes the relationship between consumer spending (consumption) and the…

Q: Scenario 2 Suppose the marginal product of capital is MPK=2-0.001K, the capital stock depreciates at…

A: Gross Investment is defined as the total expenditure or investment that is made by a company to…

Q: 12.5 The Aggregate Demand Curve 1) The ________ illustrates the relationship between the price…

A: “Since you have posted multiple questions, we will provide the solution only to the first question…

Q: P level A 60 50 40 30 20 10 0 0 10 20 30 40 real GDP = Q LRAS -AS- AD 50 40. Which of the figures…

A: Recession:It is a situation when the economy slows down. The level of GDP was reduced. The…

Q: Figure: Aggregate Expenditures Curve II Aggregate expenditures (per year) $800 Reference: Ref 11-16…

A: Aggregate expenditure refers to the total spending within an economy over a specific period,…

Q: Desired Aggregate Expenditure Yo Y₂ G Yo V₂ FIGURE 23-1 Refer to Figure 23-1. Assume the economy is…

A: Equilibrium in the Keynesian cross model occurs at the intersection of 45 degree line and aggregate…

Q: 9. In the simple Keynesian cross model of a closed economy without taxes, if the initial equilibrium…

A: The initial equilibrium income is given as $300 billionThe marginal propensity to consume is 0.75The…

Q: Question 37 Suppose in the economy of Richlandia the GDP in 2021 was $ 150 billion. Also, assume…

A: Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: If aggregate expenditure is greater than real GDP, we could expect which of the following to occur?…

A: Aggregate expenditure(AE) is the value of the finished goods and services in the economy. It…

Q: 1. Aggregate expenditures and income The following table shows consumption (C), investment (I),…

A: Aggregate expenditure refers to the entire amount of spending via all sectors of an economy on final…

Q: 1.The marginal propensity to consume in this economy is 2.The equilibrium level of output in this…

A: The marginal propensity to consume (MPC) is a concept in economics that measures the change in…

Q: Price level (GDP price Index 2012-100) Pocential AS 130 GDP 120 110 100 90 AD 19.0 195 20.0 20.5…

A: Current level of equilibrium is reached at the intersection of AD and AS. Long run equilibrium is…

Q: Planned AE (PAE, trillion $) 45° AE = Y PAE₂= 7+0.5Y PAE = 5+ 0.5Y PAE = 3 +0.5Y Actual AE (GDP, Y,…

A: Aggregate expenditure refers to the actual expenditure taking place within the economy to produce a…

Q: LAS 100 90 XXX 80 70 60 AD 110 0 320 360 400 440 480 520 Real GDP (billions of 2007 dollars) SAS…

A: The Gross domestic product is a country's final value of goods and services in a year. GDP is a…

Concept explainers

Inflation and Purchasing Power Theory

In economic terms, Inflation refers to the increase in the costs of various commodities which are used in daily lifestyle like food, clothes, transport, etc. over a specific time. It may lead to a fall in the purchasing power of the people and also affects the exchange rate of the currency because of the price increase. As the purchasing power falls the unit of the currency in the economy falls. When the prices of the commodities are decreased, then the purchasing power of the consumers will rise, then it will lead to deflation and changes the currency of the base economy to that of the foreign economy which will lead to change in exchange rates.

Question

Exhibit 19-3 Keynesian aggregate expenditures model
16
14
12
Real
aggregate
expenditures 10
8
6
(trillions of
dollars per
year)
4
2
AE
45°
0 2 4 6 8 10 12 14 16 18
Real GDP
(trillions of dollars per year)
As shown in Exhibit 19-3, if GDP is S6 trillion, the economy experiences unplanned inventory:
a. accumulation of $6 trillion.
O b. depletion of $2 trillion.
O c. accumulation of $2 trillion.
O d. depletion of $6 trillion.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1: Aggregate expenditure and Gross domestic product

VIEW

Step 2: Explanation of the correct option

VIEW

Step 3: Explanation of incorrect options

VIEW

Solution

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 4 steps

SEE SOLUTION Check out a sample Q&A here

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.

Similar questions

LIBR The Aggregate Expenditure or Keynesian macroeconomics model is based upon the theory that the level of GDP in the economy is determined by the level of aggregate spending. True False
Quèstion 1 In an open mixed economy, the inflationary expenditure gap may be described as the O A. excess of Sa + M+T over lg + X+ G at the full-employment GDP. O B. excess of GDP over Ca + lg +Xn + G at the full-employment output. OC excess of Ca + Ig + Xn + G at the full-employment GDP. O D. extra consumption that occurs when investment increases in a full-employment economy.
QUESTION 6 Potential GDP Aggregate expenditure AE, 45° Y. Real GDP (Y) When real GDP is greater than Yo in the diagram above: O A. - inventories will decrease OB. ·Aggregate expenditure will be less than Real GDP OC. Aggregate expenditure will be equal to Real GDP OD. O D. inventories will increase QUESTION 7 Y G Xn $1,000 $1,400 1,400 1,400 1,400 1,400 $0 $800 -$200 2,500 5,000 7,500 10,000 2,300 3,800 5,300 6,800 1,000 1,000 1,000 1,000 -200 -200 -200 -200 Suppose you are given the data in the table above for a hypothetical economy. All data are in billions of dollars. Yis actual real GDP, and C, Ip, G, and Xn are the consumption, planned investment, government purchases, and net exports components of aggregate expenditures, respectively. Calculate the equilibrium GDP (give your answer in billions of $) Aggregate Expenditure
COURSE: MACROECONOMICS - IS-LM and/or MUNDELL FLEMING MODELS Refer to 2 different models (and/or conditions) under which an increase in the amount of money circulating in the economy has a NULL impact on GDP. Then, refer to 2 different models (and/or conditions) under which an increase in the amount of money circulating in the economy has a MAXIMUM impact on GDP. EXPLAIN very briefly the mechanism by which each model generates that NULL or MAXIMUM impact on GDP. Hint: 2 conditions under increase of M (money) and how impact null (zero) and maximum on GDP. Example, considering both fiscal or monetary policies or liquidity trap model. Please graph and explain on detail both cases.
What could cause the following shift? O Increase in GDP. O Expansionary fiscal policy. O Decrease in future MPK. All of the above. FE IS LM
2. Consider a Keynesian IS-LM model for national income: Y = C(Y-T) + I (r) + G L(r,Y)= M³ IS: LM: where we consider Y and r as the endogenous variables and G, M³, and T as the exogenous variables. (a) Find the effect of a lump-sum tax, T, change on Y, i.e., OY/OT, using the implicit function theorem.
4. An economy's Planned Aggregate Expenditure (PAE) is given by the formula PAE = 3,400 +0.6Y in terms of its autonomous and induced components respectively, where Y represents output. a. State what is meant by the terms autonomous and induced expenditure b. Given that, under Keynes, the economy is in short term equilibrium where Y-PAE, find the numerical level of short-run output using the above equation. c. If potential output in the same economy is 9,000 draw a Keynesian Cross diagram and label any gap which exists between actual and potential output.