9.)In an economy with no government and no foreign sec-tors, autonomous consumer spending is $250 billion,planned investment spending is $350 billion, and themarginal propensity to consume is 2/3.a. Plot the aggregate consumption function andplanned aggregate spending.b. What is unplanned inventory investment when realGDP equals $600 billion?c. What is Y*, income-expenditure equilibrium GDP?

unplanned inventory investment = Real GDP - Aggregate expenditure planned.

Answered: In an economy with no government and no…

ENGR.ECONOMIC ANALYSIS

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Author:NEWNAN

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Chapter1: Making Economics Decisions

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Homework: Demand-Side Equilibrium: Unemployment or Inflation? The following graph shows the total expenditure line (TE) for an economy where current equilibrium output is $400 billion and potential output is $650 billion. REAL EXPENDITURE (Billions of dollars) § 2 600 500 400 300 200 100 0 0 100 45-degree ling 200 300 400 500 600 REAL GDP (Bilions of dollars) The economy is experiencing TE Potential GDP 700 800 TE equal to $ by billion. Thus, the value of the multiplier for this economy is billion. To close the output gap, government purchases could On the previous graph, shift the TE line to show the change in total expenditure necessary to close the output gap. Note: Select and drag the curve to the desired position. The curve will snap into position, so if you try to move a curve and it snaps back to its original position, just drag it a little farther.
Refer to the table. Planned Planned Consumption Saving Planned Real GDP Investment $6,000 $1,000 $1,000 $5,000 10,000 0 10,000 14,000 1,000 15,000 18,000 2,000 20,000 22,000 25,000 26,000 30,000 If real Gross Domestic Product (GDP) equals $25,000, what is the average propensity to save? OA. 0.0 OB. 0.88 OC. 0.12 OD. 0.56
Suppose the consumption function is C-$700 billion +0.8Y and the government wants to stimulate the economy. By how much will aggregate demand at current prices shift initially (before multiplier effects) with Mc raw Instructions: Enter your responses as a whole number. a. a $30 billion increase in government purchases? $ billion b. a $30 billion tax cut? $ c. a $30 billion increase in income transfers? billion $ What will the cumulative AD shift (after multiplier effects) be for d. the increased government spending? $ e. the tax cut? F stly clear billion billion billion f the increased transfers? $[ billion ▬▬▬ Q Search D < Prev W 1 of 5 C
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9 In the simple macro model with government and foreign trade, if the marginal propensity to consume out of disposable income is MPC, and the net tax rate is t, and the marginal propensity to import is m, then what will be the marginal propensity to consume out of national income? What will be the simple multiplier? Please show your steps
Consider the following planned aggregate expenditure function: AEp=1000+0.8Y 1. Calculate the income-expenditure equilibrim real GDP, Y*, for this economy. Illustrate the equilibrium real GDP on a diagram below. Label the equilibrium point E. 2. Explain how an increase in uncertainty due to the collapse of multiple banks in the economy affects consumption and firm investment spending. Also explain what effect these changes would have on AEp and Y*. Show the effect on your diagram in part 1. 3. Suppose following the events above consumption and investment spending change by 220. By how much would Y* change eventually? Calculate and explain. 4. If the federal government wants to get the economy back at producing Y* you found in part 1 by adjusting its purchases of goods and services (G) by how much would it have to change G? (Hint: use the multiplier to calculate).
From the table below answer the following questions Y C I G AE 0 20 15 25 100 100 15 25 200 180 15 25 300 260 15 25 400 340 15 25 500 420 15 25 1- What is the value of autonomous Consumption? 2- What is the value of new equilibrium if government purchases increase by $100? 3- What is the value of equilibrium consumption? 4- What is the value of autonomous Aggregate Expenditure?
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