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PAE = 600 + 0.5Y PAE = 400 + 0.5Y PAE = 200 + 0.5Y 600 400 200 45 400 800 1,200 Output, Y a.) Based on the figure, when PAE = 600 + 0.5Y, short-run equilibrium output equals: [ Select ] b.) If autonomous spending falls from 400 to 200, then the new short-run equilibrium output will equal: Select ] c.) If the government wishes to stimulate the economy and restore the old equilibrium, it could increase government spending by [Select to eliminate the output gap. d.) The government could also eliminate the recession through changing taxes. It would need to Select ] in order to offset the output gap. Planned Aggregate Expenditure, PAE

PAE = 600 + 0.5Y PAE = 400 + 0.5Y PAE = 200 + 0.5Y 600 400 200 45 400 800 1,200 Output, Y a.) Based on the figure, when PAE = 600 + 0.5Y, short-run equilibrium output equals: [ Select ] b.) If autonomous spending falls from 400 to 200, then the new short-run equilibrium output will equal: Select ] c.) If the government wishes to stimulate the economy and restore the old equilibrium, it could increase government spending by [Select to eliminate the output gap. d.) The government could also eliminate the recession through changing taxes. It would need to Select ] in order to offset the output gap. Planned Aggregate Expenditure, PAE

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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**Graph Explanation** The graph displays the Planned Aggregate Expenditure (PAE) against Output (Y). It includes three lines representing different levels of autonomous spending: 1. **PAE = 600 + 0.5Y** 2. **PAE = 400 + 0.5Y** 3. **PAE = 200 + 0.5Y** Each line indicates a different scenario of autonomous spending, with the slope (0.5) representing the marginal propensity to consume. The dashed 45-degree line shows points where PAE equals actual output (Y), identifying possible equilibrium states. **Questions** a.) Based on the figure, when \( PAE = 600 + 0.5Y \), short-run equilibrium output equals: [Select] b.) If autonomous spending falls from 400 to 200, then the new short-run equilibrium output will equal: [Select] c.) If the government wishes to stimulate the economy and restore the old equilibrium, it could increase government spending by [Select] to eliminate the output gap. d.) The government could also eliminate the recession through changing taxes. It would need to [Select] in order to offset the output gap.
Transcribed Image Text:**Graph Explanation** The graph displays the Planned Aggregate Expenditure (PAE) against Output (Y). It includes three lines representing different levels of autonomous spending: 1. **PAE = 600 + 0.5Y** 2. **PAE = 400 + 0.5Y** 3. **PAE = 200 + 0.5Y** Each line indicates a different scenario of autonomous spending, with the slope (0.5) representing the marginal propensity to consume. The dashed 45-degree line shows points where PAE equals actual output (Y), identifying possible equilibrium states. **Questions** a.) Based on the figure, when \( PAE = 600 + 0.5Y \), short-run equilibrium output equals: [Select] b.) If autonomous spending falls from 400 to 200, then the new short-run equilibrium output will equal: [Select] c.) If the government wishes to stimulate the economy and restore the old equilibrium, it could increase government spending by [Select] to eliminate the output gap. d.) The government could also eliminate the recession through changing taxes. It would need to [Select] in order to offset the output gap.
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