Table: Lemonade and Cookies 2016 Output 2016 Price 2017 2017 Price Output Lemonade 200 glasses $1 per glass Cookies 220 glasses 100 cookies $ 2 per 100 cookies cookie $1 per glass $2.25 cookie per Assume that the potential real GDP in 2016 is $ 420, which kind of output gap (for Real GDP) we have in this year? 0 negative output gap of $ 20 negative output gap of $ 40 positive output gap of $ 20 O positive output gap of $40

Table: Lemonade and Cookies 2016 Output 2016 Price 2017 2017 Price Output Lemonade 200 glasses $1 per glass Cookies 220 glasses 100 cookies $ 2 per 100 cookies cookie $1 per glass $2.25 cookie per Assume that the potential real GDP in 2016 is $ 420, which kind of output gap (for Real GDP) we have in this year? 0 negative output gap of $ 20 negative output gap of $ 40 positive output gap of $ 20 O positive output gap of $40

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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1. Aggregate expenditures and income The following table shows consumption (C), investment (1), government spending (G), and net exports (X-M) in a hypothetical economy for various levels of real GDP (Y). Assume that the price level remains unchanged at all levels of income. All figures are in billions of dollars. Compute aggregate expenditures for each income level and fill in the last column In the following table. Y с G 500 525 250 150 600 550 250 150 575 250 150 600 250 150 -200 900 625 250 150 -200 700 800 AL AGGREGATE EXPENDITURES (Billions of dollars) The following graph shows real GDP on the horizontal axis and aggregate expenditures (AE) on the vertical axis. The orange line (square symbols) represents a 45-degree (Y-AE) line. 1000 Use the blue points (circle symbol) to plot the aggregate expenditures line for this economy. Line segments will automatically connect the points. 900 300 I 700 X-M Aggregate Expenditures -200 725 -200 750 775 800 825 600 500 + -200 AE line *+…
illustrates and how it is related to the aggregate demand curve. 3. Figure 11.8 shows the aggregate expenditure curve when the price level is 110. When the price level rises to 120, the AE curve shifts vertically downwards from AE, by $1 trillion. When the price level falls to 100, the AE curve shifts vertically upwards from AE, by $1 trillion. Figure 11.8: FIGURE 11.8 Short Answer Problem 10 (a) 8 Price level (GDP deflator) Aggregate planned expendit (trillions o FIGURE 11.9 Short Answer Problem 10 (b) 130 a. Draw two new AE curves in figure 11.8 for the price levels of 100 and 120. What are the equilibrium levels of aggregate expenditures for these two price levels? Label as 'b' the equilibrium point when the price level is 100 and 'c' as price level is 120. 120 b. Use figure 11.8 to obtain three points 'a', 'b' and 'c' on the aggregate demand curve. Plot these three points on figure 11.9. Assume that the aggregate demand curve is linear and draw the AD curve on figure 11.9. Figure…
Which of the following is true? O An increase in aggregate demand is the same as a downward shift in the total expenditure function O An increase in aggregate demand is the same as an increase in aggregate supply O An inward shift of the aggregate demand curve is the same as an upward shift in the total expenditure function O An increase in aggregate demand is the same as an upward shift in the total expenditure function
Real GDP Consumption (dollars) expenditure (dollars) 10 22.5 20 30 30 37.5 40 45 50 52.5 60 60 2 LAS 160 * SAS 150 140 130 120 AD 4 8 12 16 20 24 Real GDP (trillions of 2000 dollars) In the above table and figure, supposed that there is no import or proportional tax. To pull the economy back to the long-run equilibrium, the government can conduct a balanced budget operation by spending $ trillion. O 1) 1 O 2) 2 O 3) 4 4) 8 el (GDP deflator, 2000 = 100) Co
4. Study Questions and Problems #4 Real GDP (Y) and aggregate expenditures (AE) are shown for an economy in the first two columns of the following table. Suppose that economic forecasters predict government spending to increase in the near future from G=$1 trillion to G=$1.25 trillion. Recalculate the value of aggregate expenditures given the new value of G=$1.25 trillion. Enter those values to the second decimal place in the third column of the table. Real GDP (Y) (Trillions of dollars per year) 0 1 2 3 4 5 6 7 8 9 10 G=$1 trillion (Trillions of dollars per year) 1.25 2.00 2.75 3.50 4.25 Aggregate Expenditures 5.00 5.75 6.50 7.25 8.00 8.75 G=$1.25 trillion (Trillions of dollars per year) 1.56 2.5 3.44 4.38 5.31 6.25 7.19 8.13 9.06 10 10.94 The black line on the following graph represents the 45-degree line where real GDP equals aggregate expenditures. Use the blue points (circle symbol) to plot the aggregate expenditures line for this economy when G-$1.25 trillion. Line segments will…
(Figure: Coffee and Ice Cream I) Kemala spends her income on ice cream and coffee, and coffee sells for $1 a cup. If ice cream sells for $6 per gallon, Kemala will purchase: Coffee 12- (cups) 11 10 98865 7 4 3 2 1 0 U₁ O 1 gallon. O 6 gallons. O 8 gallons. 2 gallons. U₂ 1 2 3 4 5 6 7 8 9 10 Ice cream (gallons)
Consider an economy with a corn producer, some consumers, and a government. In a given year, the corn producer grows 30 million bushels of corn and the market price for corn is $5 per bushel. Of the 30 million bushels produced, 20 million are sold to consumers, 5 million are stored in inventory, and 5 million are sold to the government to feed the army. The corn producer pays $60 million in wages to consumers and $20 million in taxes to the government. Consumers pay $10 million in taxes to the government, receive $10 million in interest on the government debt, and receive $5 million in Social Security payments from the government. The profits of the corn producer are distributed to consumers.(a) Calculate GDP using (i) the product approach, (ii) the expenditure approach, and (iii) the income approach.(b) Calculate private disposable income, private sector saving, government saving, national saving, and the government deficit. Is the government budget in deficit or surplus? Explain your…
A-What is the equilibrium price and quantity for this economy? B-is this economy operating above or below potential output? What is the gdp gap( actual gdp-potential gdp)
Table 7-3 (in $ billion) consumption $1,100.00 %3D inventory investment = $460.00 purchased of new capital goods = $560.00 government purchases = $300.00 %3D exports = $20.00 %3D imports $33.00 %D purchased of new residential housing = $58.00 %3D Refer to Table 7-3, GDP equals O $2,165.00 O $2,432.00 O $2,465.00 O $2,425.00
5. Expenditure Gaps The following graph shows the planned expenditure line (AE) for an economy where current equilibrium income is $400 billion and full-employment income is $650 billion. REAL EXPENDITURE (Billions of dollars) 800 700 600 500 400 300 200 100 0 0 100 45-degree line The economy is experiencing the income gap would require a $ this economy is PE Full-Employment Income 200 300 400 500 600 700 800 INCOME (Billions of dollars) billion PE ? billion. Closing in government spending. Thus the value of the multiplier for with the absolute value of the gap equal to