2 Income and Expenditure Work It Out: Question 4 of 4Recall that the consumption function isC = $100 billion +0.75 X YDand that the original equilibrium value of Y* is $1,600 billion.Use the accompanying table to answer each of the followingquestions.What is the value of the multiplier?The multiplier isGDPYoсIplanned AEplanned Unplanned$0$0 $100$300$400-$400400400400300700-300800 800 700 3001,000-2001,0003001,300-1001,200 1,2001,600 1,600 1,30030002,000 2,000 1,600 3001002002,400 2,400 1,900 3002,800 2,800 2,2003,2003003003,200 2,500 300400If planned investment spending falls to $200 billion, what is the new Y*?Y* = SIf, instead, autonomous consumer spending rises to $200 billion, what is the new Y*?1,6001,9002,2002,5002,800billion

Equilibrium in the economy is reached where planned aggregate spending is equal to income.

Income and Expenditure Work It Out: Question 4 of 4 Recall that the consumption function is C = $100 billion +0.75 X YD and that the original equilibrium value of Y* is $1,600 billion. Use the accompanying table to answer each of the following questions. What is the value of the multiplier? The multiplier is GDP $0 400 Y*=S If planned investment spending falls to $200 billion, what is the new Y*? Yo so $100 $300 400 400 300 C Iplanned AEplanned $400 700 1,000 1,300 1,600 1,900 2,200 2,500 2,800 800 800 700 300 1,200 1,200 1,000 300 1,600 1,600 1,300 300 2,000 2,000 1,600 300 2,400 2,400 1,900 300 2,800 2,200 300 2,800 3,200 3,200 2,500 300 If, instead, autonomous consumer spending rises to $200 billion, what is the new Y*? lunplanned -$400 -300 -200 -100 0 100 200 300 400 billion

Income and Expenditure Work It Out: Question 4 of 4 Recall that the consumption function is C = $100 billion +0.75 X YD and that the original equilibrium value of Y* is $1,600 billion. Use the accompanying table to answer each of the following questions. What is the value of the multiplier? The multiplier is GDP $0 400 Y=S If planned investment spending falls to $200 billion, what is the new Y? Yo so $100 $300 400 400 300 C Iplanned AEplanned $400 700 1,000 1,300 1,600 1,900 2,200 2,500 2,800 800 800 700 300 1,200 1,200 1,000 300 1,600 1,600 1,300 300 2,000 2,000 1,600 300 2,400 2,400 1,900 300 2,800 2,200 300 2,800 3,200 3,200 2,500 300 If, instead, autonomous consumer spending rises to $200 billion, what is the new Y*? lunplanned -$400 -300 -200 -100 0 100 200 300 400 billion

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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There is a bar on Off‐Main Street called the Rock‐n‐Roll Bar. All the people that go to that bar like to listen to rock‐n‐roll music, and they love live bands. If the bar owner brings bands in to play music on a Saturday night, she will make a lot of money. However there are tenants in this building who get annoyed by the loud music. The benefits/costs to the owner/tenants of having zero, one, two or three bands on a Saturday night are listed below. Assume the bar owner has the right to hire as many bands as she likes. Iftransaction costs were $90, split between the bar owner and the tenants, how manybands would play? What would social welfare be? A. Three bands would play and social welfare would be ‐100.B. Two bands would play and social welfare would be 75.C. Two bands would play and social welfare would be ‐15.D. No bands would play and social welfare would be 0.E. Three bands would play and social welfare would be ‐190