KConsider the following diagram, in which the current short-run equilibrium is atpoint A.a. At point A, the economy has an inflationary gapb. If the marginal propensity to consume equals 0.5, to eliminate the gap, thegovernment should decrease spending by $trillion. (Round your answer to twodecimal places.)Price Level122118114LRASSRASA2222.8 23.6Real GDP per Year ($ trillion)AD

a.At point A the economy has an inflationary gap.Inflationary Gap:An "inflationary gap" refers to a…

Answered: K Consider the following diagram, in…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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5. Suppose that people’s preference for consumption fell. How would this change the aggregate demand: Increase, Decrease or No change at any given price: Decrease or Increase? How would this shift the AD curve: Leftward, Rightward, or No shift? Change in AD: Shift of AD:
Read Eye on Booms and Busts. Explain why the NBER reported that the 2008 recession began before real GDP had fallen for two successive quarters. The NBER Committee OA. anticipated the recession was going to happen because real GDP clearly peaked in 2007 OB. based its decision on peaks in the data on real personal income, real manufacturing, wholesale and retail sales, industrial production, and employment, which all peaked between November 2007 and June 2008 OC. made an error because a recession cannot occur unless real GDP falls for two successive quarters O D. saw that the business cycle trough occurred in the second quarter of 2009, so it was obvious that the recession began in 2008
Planned AE (PAE, trillion $) 45° AE = Y PAE₂= 7+0.5Y PAE = 5 +0.5Y PAE = 3 +0.5Y Actual AE (GDP, Y, trillion $) Refer to a graph above. Suppose the the economy has the planned aggregate expenditure of PAE2 and the potential GDP is $10 trillion. Which of the following statements about this economy is false? O There is an inflationary output gap of $4 trillion. O In order for this economy to get back to the potential GDP, the PAE curve needs to shift to the right The economy is in an expansion. O The economy produces more than spends.
In the figure at right, if the relevant aggregate demand curve is AD2, what type of gap exists and how large is it? A. inflationary gap of $500 billion B. recessionary gap of $500 billion C. recessionary gap of $1 trillion D. inflationary gap of $1 trillion
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
1. a. You are studying an economy with an income tax rate, t1, of 32% and an MPS of 0.3. It is currently suffering from a "recessionary gap" of $500 m. (i.e., Eqm Y
5 k es Price Level 170 150 130 110 90 The Economy of Morin 70 460 480 500 520 54535,75 580 600 Real GDP AD AS a. If potential GDP (LAS) is $550, and the economy is presently in equilibrium, then there is a(n) [recessionary b. In order to close this gap aggregate demand must increase by $ billion. gap of $ billion. c. If every $1 change in government spending leads to a $4 change in aggregate demand, government spending must increase by $ billion.
A fall in mps raises the GDP multiplier. O True O False
Price Level 8 7 6 X 50 4 3 2 1 0 2 4 AS AD 6 8 10 12 14 16 18 20 Real GDP (in billions of dollars per year) billion. QE Instructions: Enter your responses as a whole number. a. Identify the macro equilibrium. Instructions: Use the tool provided 'QE' to identify the current macro equilibrium on the graph. The current macro equilibrium is when real GDP is $ Suppose that full-employment GDP is $13 billion. b. The real GDP gap is $ c. Aggregate demand must shift (left or right) by $ billion. billion to achieve the full-employment equilibrium.
4
LAS 130 SAS 120 110 B. 100 90 AD1 ADo 14 15 16 17 18 19 Real GDP (trillions of 2009 dollars) 19) In the above figure, if the economy initially is at point A and government expenditure increases, in the short run the economy will move to point A) B. C) A, that is, the equilibrium will not change. B) C. D) None of the above answers is correct. lnim that protectionism saves domestic jobs? Price level (GDP deflator, 2009-100
Consider the following diagram, in which the current short-run equilibrium is at point A. At point A, the economy has If the marginal propensity to save equals 0.20, calculate the change in government spending that could eliminate the gap. S trillion. (Round your answer to two decimal places.) CO Price Level 40 120 115 111 0 LRAS 22 22.5 23 Real GDP per Year ($ trillion) SRA AD

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