Aggregate planned expenditure(trillions of 2009 dollars)7145° lineAE2AEO2a)b)planin thBAAE13a)1534140141516171819Real GDP (trillions of 2009 dollars)In the above figure the economy is initially at point A on the aggregateexpenditure curve AEQ. Suppose investment decreases. As a resultthe AE curve shifts upward to a curve such as AE2.the AE curve shifts downward to a curve such as AE1.O there is a movement along AEO to a point such as B.O there is a movement along AEO to a point such as C.5678190100109b) Tc) Td) Ite) $1

It is the total spending in an economy on final services and items during a specific period. When AE…

Real GDP (trillions of 2009 dollars) In the above figure the economy is initially at point A on the aggregate expenditure curve AEO. Suppose investment decreases. As a result O the AE curve shifts upward to a curve such as AE2. O the AE curve shifts downward to a curve such as AE1. O there is a movement along AEO to a point such as B. O there is a movement along AEO to a point such as C.

Real GDP (trillions of 2009 dollars) In the above figure the economy is initially at point A on the aggregate expenditure curve AEO. Suppose investment decreases. As a result O the AE curve shifts upward to a curve such as AE2. O the AE curve shifts downward to a curve such as AE1. O there is a movement along AEO to a point such as B. O there is a movement along AEO to a point such as C.

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 following graph plots the planned expenditure line (PE) for an economy in which current equilibrium income is $400 billion and the full- employment income level is $650 billion. The graph also plots a 45 degree line on the same coordinate pair. REALEXPENDITURE (Billions of dollars) 800 700 600 500 400 300 200 100 0 0 100 200 300 400 45-degree line PE PE Full-Employment Income 500 INCOME (Billions of dollars) The economy is experiencing would require a $ 600 700 800 .The absolute value of the income gap is equal to $ billion. Closing the gap billion in government spending. Thus the value of the multiplier for this economy is On the graph, shift the PE line to show the change in the planned expenditure line necessary to close the income gap.
Consider the aggregate expenditure model. Suppose there is an increase in real GDP in the economy. Classify each economic variable as to whether it increases, decreases, or remains unchanged when real GDP increases. Increases Decreases Answer Bank Does not change consumption marginal propensity to consume government spending investment aggregate expenditures net exports imports natural rate of output exports
If the output level is such that the Y=AE line (45-degree line) is below the aggregate expenditure line, which of the following is true? a Aggregate expenditure is greater than output, so inventories will decrease and output will increase. b Aggregate expenditure is less than output, so inventories will increase and output will decrease. c Aggregate expenditure is less than output, so inventories will decrease and output will increase. d Aggregate expenditure is greater than output, so inventories will increase and output will decrease.
Which of the following is NOT a component of planned aggregate expenditure? Select one: O a. Planned investment O b. Government purchases O c. Transfer payments d. Net exports O e. Consumption
Fill in the table below to answer the next five questions. Assume that l", G and NX are fixed. Consumption Planned Government Net Exports Aggregate Change in Real GDP (Y) (C) Investment (Ip) Expenditures (G) (NX) Expenditures (AE) Inventories 10000 11000 550 12000 1000 13000 10520 14000 11320 15000 12120 730 The full-employment level of output is $3000 above the current level of output. How much should the government change government expenditures in order for the new equilibrium to be equal to the full- employment level of output? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a -600 b 600 3000 d -3000
Consider an economy of a nation that has the following aggregate expenditure. 1300- 1040- 780- 520- AE 260 Y = AE 260 390 520 650 780 9ło 1040 1170 1300 130 Real GDP Note: Please make sure your final answers are accurate to 2 decimal places. a) What is the value of the equilibrium national real GDP? Equilibrium = $0 b) What is the value of the multiplier? Multiplier = 0 c) If the autonomous consumption were to decrease by $520, what would be the new value of equilibrium real GDP? New equilibrium = S0 Aggregate expenditures
Indicate whether each of the following affect consumption spending (C), investment spending (I), government spending (G), net export spending (NX), or none of the above (N). Enter only the letter given in parenthesis. Carmax sells a three year old car to John The government sends a social security payment to your grandfather John spends his social security check on a new computer Publix buys 4 new computers You pay your tuition to UCF
181.Which of the following statements is accurate? a.When unplanned inventory changes are positive, GDP is below its equilibrium value b.When unplanned inventory changes are negative, GDP is above its equilibrium value c.When unplanned inventory changes are positive, GDP is at its equilibrium value d.When unplanned inventory changes are negative, GDP is below its equilibrium value e.None of the above 182.When unplanned inventory changes are positive, GDP is current at its equilibrium level a.True b.False 183.Consider Figure 11-10 above. Which of the following is true? a.Equilibrium GDP is $8 trillion b.Unplanned inventory changes are $0.4 trillion when GDP is $8 trillion c.Equilibrium GDP is $7 trillion d.The MPC is 1 e.Government expenditures are $8.6 trillion 184.Consider Figure 11-10 above. Equilibrium GDP occurs at a.$7 trillion b.$8 trillion c.$9 trillion d.$8.6 trillion e.there is…
Which of the following correctly describes how a decrease in the price level affects consumption spending? Select one: a. A decrease in the price level raises real wealth, which causes consumption to increase. b. A decrease in the price level decreases the amount of money a household needs to buy goods and so raises the interest rate, which causes consumption to increase. c. A decrease in the price level increases the amount of money a household needs to buy goods and so raises the interest rate, which causes consumption to increase. d. A decrease in the price level lowers real wealth, which causes consumption to decrease.
3. If the current equilibrium GDP value is $925,000 and investment spending decreases by $25,000 with an MPC of 0.8, solve for the new equilibrium GDP.
The spreadsheet gives real GDP (Y) and its components in billions of dollars. Calculate equilibrium expenditure. Equilibrium expenditure is $ billion. ABCDE 1 YC 234567 A 100 140 80 20 40 30 B 200 220 80 с 300 300 80 D 400 | | 380 80 20 E 500 460 80 F 600 540 80 20 EC222222 F GXM G 20 40 60 20 40 90 40 120 20 40 150 40 180
2. From what was learned in class, explain what the values of the slope and vertical intercept of the aggregate consumption function mean from an economic perspective. Income-expenditure equilibrium Using the data in the following table to complete the following questions. GDP YD Planned (billions of dollars) $0 $0 $200 $100 400 400 500 100 800 800 800 100 1,200 1,200 1,100 100 1,600 1,600 1,400 100 2,000 2,000 1,700 100 2,500 2,500 2,000 100 3,000 3.000 2,300 100 1. Complete the columns for AEPlanned and unplanned in the table. 2. What is the value of the MPC? 3. What is the aggregate consumption function? AE Planned Unplanned 4. What is the equation for the planned aggregate expenditure function? 4. 5. What is the value of income-expenditure equilibrium GDP, (Y*)? 6. Explain in economic terms what happens when not in the income-expenditure equilibrium? Both when GDP > AE planned and GDP < AE planned. For each situation what needs to happen to move the economy toward equilibrium?.