n the Keynesian Cross Model, the planned expenditure equation is given as: PE = MPC(Y-T) + I + G = 100 + 0.8(Y-T). The actual expenditure equation AE = Y. Investment T = 40; government spending G = 20 A-7 Medium) 24. Refer to the information given above, what is equilibrium level of income? (Hint: starting from AE = PE) O a. 888.88 ОБ. 340 Oc. 560 O d. 1,000 A-8 Medium) 25. Refer to information given above, what is the multiplier of government spending? О а. 10 O b. 1.25 Ос. 5 O d. 2.5

n the Keynesian Cross Model, the planned expenditure equation is given as: PE = MPC(Y-T) + I + G = 100 + 0.8(Y-T). The actual expenditure equation AE = Y. Investment T = 40; government spending G = 20 A-7 Medium) 24. Refer to the information given above, what is equilibrium level of income? (Hint: starting from AE = PE) O a. 888.88 ОБ. 340 Oc. 560 O d. 1,000 A-8 Medium) 25. Refer to information given above, what is the multiplier of government spending? О а. 10 O b. 1.25 Ос. 5 O d. 2.5

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The Keynesian cross 45 degree line represents: Every point where aggregate expenditure is equal to real GDP O The points where aggregate expenditure is greater than real GDP The points where Keynes believed that aggregate expenditure should be O The points where aggregate expenditure is less than real GDP
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<Y full employment, FE, aka Yn). Make the necessary calculations for the topolicythat it should institute; who does what? Provide the full name of this policy. Compare this economy to one without income taxes to explain the term “automatic stabilizer.”[Hint: Let I change and compare the I multipliers in each of these economies.] \
Real GDP C G X-M 2500 1430 540 400 90 2400 1360 540 400 100 2300 1290 540 400 110 2200 1220 540 400 120 2100 1150 540 400 130
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.
Equilibrium expenditure occurs where * O The aggregate expenditure curve crosses the 45-degree line O Planned expenditures exceed national income Savings exceed planned investment O All of the answers are correct Option 5
Equilibrium expenditure occurs where * The aggregate expenditure curve crosses the 45-degree line Planned expenditures exceed national income Savings exceed planned investment O All of the answers are correct O Option 5 Back Next
The slope of the aggregate expenditure line is always this slope equals the than 1. If there are no imports or taxes, O greater: marginal propensity to save O greater: marginal propensity to consume O less; marginal propensity to consume O less; marginal propensity to save
YAS = 742 + 15 P- 28Poil YAD = 478 - 45P + 18G Suppose initially, the Poil = $93 per barrel and government spending is equal to $630. %3D Part (a): Calculate equilibrium GDP and the price level. Part (b): Determine the magnitude of the multiplier if oil prices exogenously rise by $1. Part (c): Using 2 to 3 sentences, provide a theoretical explanation for why the multiplier you calculated in part (b) is smaller (in absolute value) than the simple multiplier. Hint: you should be mentioning how the price level impacts AE and AD variables. Part (d): Determine the magnitude of the multiplier if government spending exogenously increases by $1. Part (e): Using 2 to 3 sentences, provide a theoretical explanation for why the multiplier you calculated in part (d) is smaller than the simple multiplier. Hint: you should be mentioning how the price level impacts AE and AD variables.
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
Use the following consumption function data to anwser the question bellow: Real disposable income consumption savings aMpc MPS
Question 3 of 16 Income and consumption changes for five people are shown in the table. Given this information, rank the marginal propensities to consume (MPC) for the five people from largest to smallest. Largest MPC Smallest MPC Answer Bank Bert Doug Eli Carter Al Name Income change Consumption change Al +$5,000+$5,000 +$3,000+$3,000 Bert +$2,500+$2,500 +$800+$800 Carter +$1,000+$1,000 +$800+$800 Doug −$2,500−$2,500 −$1,750−$1,750 Eli −$5,000−$5,000 −$2,000−$2,000
2. For simplicity, we normally treat aggregate tax payments (T) as determined by politics or other factors unrelated to output. However, suppose that aggregate tax payments are proportional to income. That is, T=t·Y, where tis the marginal tax rate and is between o and 1. a. How, if at all, would this change in our assumptions affect the Keynesian cross diagram? b. Would this change increase, decrease, or have no impact on the multiplier effect, or is it not possible to tell? (That is, how would the effect of a given vertical shift of the planned expenditure line compare with what it was before?)