2. EquilibriumThe following table shows the real output demanded and supplied at various price levels in a hypothetical economy.Real Output DemandedPrice LevelReal Output Supplied (Billions of dollars)(Billions of dollars)(Index number)(Billions of dollars)5080400756035012540275175301753502050On the following graph, use the blue points (circle symbols) to plot the aggregate demand (Initial AD) curve for the economy. Then use the orangepoints (square symbols) to plot the short-run aggregate supply (SRAS) curve for the economy.Note: Line segments will automatically connect the points.100Initial AD80 Note: Line segments will automatically connect the points.100Initial AD8060SRAS40New AD20100200300400500REAL GDP (Index numbers)The equilibrium price level is ▼, and the equilibrium level of real output isSuppose that the government spending increases by $25 billion and the expenditure multiplier in this economy is 6.On the previous graph, use the purple points (diamond symbols) to illustrate the effect of the increase in government spending on the aggregatedemand (New AD) curve.The change in government spendingv the equilibrium level of real output byPRICE LEVEL (Billions of dollars)

The aggregate demand-aggregate supply model is a macroeconomic model based on the Keynesian school…

The equilibrium price level is , and the equilibrium level of real output is Suppose that the government spending increases by $25 billion and the expenditure multiplier in this economy is 6. On the previous graph, use the purple points (diamond symbols) to illustrate the effect of the increase in government spending on the aggregate demand (New AD) curve. The change in government spending the equilibrium level of real output by

The equilibrium price level is , and the equilibrium level of real output is Suppose that the government spending increases by $25 billion and the expenditure multiplier in this economy is 6. On the previous graph, use the purple points (diamond symbols) to illustrate the effect of the increase in government spending on the aggregate demand (New AD) curve. The change in government spending the equilibrium level of real output by

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Use the figure to calculate the marginal propensity to consume (MPC) between point A and point B. MPC = (Enter your response as a real number rounded to two decimal places.) C Real consumption spending ($ billions) Consumption and National Income $3,750 $2,250 B $3,000 $5,000 Real national income or real GDP ($ billions) C
Homework: Demand-Side Equilibrium: Unemployment or Inflation? The following graph shows the total expenditure line (TE) for an economy where current equilibrium output is $400 billion and potential output is $650 billion. REAL EXPENDITURE (Billions of dollars) § 2 600 500 400 300 200 100 0 0 100 45-degree ling 200 300 400 500 600 REAL GDP (Bilions of dollars) The economy is experiencing TE Potential GDP 700 800 TE equal to $ by billion. Thus, the value of the multiplier for this economy is billion. To close the output gap, government purchases could On the previous graph, shift the TE line to show the change in total expenditure necessary to close the output gap. Note: Select and drag the curve to the desired position. The curve will snap into position, so if you try to move a curve and it snaps back to its original position, just drag it a little farther.
= 450 + 0.4Y I = 350G = 150X = 70Z = 35 + 0.1Y T = 0.15YYf = 1550Q.2.1 Calculate the level of autonomous spending in this economy.(2)Q.2.2Calculate the size of the multiplier(Note: Round your answer to two decimal places)(4)Q.2.3Calculate the equilibrium level of income (Hint: use the multiplier method)(2)© The Independent Institute of Education (Pty) Ltd 2020Page 6 of 10 202020Q.2.4Q.2.5Q.2.6Question 3Calculate the tax revenue to the government of this country when the economy (2) remains in equilibrium.Calculate what the new equilibrium income should be if the government of this (6) country decides to cancel all taxes, implying the tax rate would now be 0%.Before the government decreased the tax rate, how much of government spending was required to bring the economy to full employment?
On the following graph illustrate the impact of a sudden decline in consumer confidence that reduces autonomous consumption by $50 billion. Assume MPC = 0.8.(a) What is the new equilibrium level of real output? (Don't forget the multiplier.)(b) How large is the real GDP gap?(c) What has happened to average prices?
3. For the following problem, assume that the MPC, b, takes into account how much consumers spend as total income (Y) in the economy is changes. (Also: Hint GDP = Total Y) So we can rewrite our consumption function as : C= a +bY Assume: a= $2900 billion b=.75 GDP= $9,000 billion. A) What is C= B) What is S= C) If consumers were the only ones buying goods in the economy, would the economy have an excess supply of goods, excess demand of goods or would the economy be at equilibrium ?
Refer to the table on the next page in answering the questions that follow:a. If full employment in this economy is 130 million, will there be an inflationary expenditure gap or a recessionary expenditure gap? What will be the consequence of this gap? By how much would aggregate expenditures in column 3 have to change at each level of GDP to eliminate the inflationary expenditure gap or the recessionary expenditure gap? Explain. What is the multiplier in this example?b. Will there be an inflationary expenditure gap or a recessionary expenditure gap if the full-employment level of output is $500 billion? Explain the consequences. By how much would aggregate expenditures in column 3 have to change at each level of GDP to eliminate the gap? What is the multiplier in this example? c. Assuming that investment, net exports, and government expenditures do not change with changes in real GDP, what are the sizes of the MPC, the MPS, and the multiplier?
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* Question Completion Status: From the previous question, what is the value of the multiplier? QUESTION5 Given the following data, solve for equilibrium national income Y: • C = $200 + 0.9375Y • YD = Y - TA + TR, where TA = tY = 0.2Y, and TR = 0 • Ip $800 • G= $1,000 [Use the following format for your response: $6,000] QUESTION 6 In the previous questions, AD = $2000 + 0.75Y. What is the value of the multiplier?
c. Given the original $20 billion level of exports, what would be net exports and the equilibrium GDP if imports were $10 billion greater at each level of GDP? Fill in the gray-shaded cells. Instructions: Enter your answers as a whole number. If you are entering any negative numbers be sure to include a negative sign (-) in front of those numbers. (1) (2) (3) (4) (5) (6) Aggregate Expenditures, Private Closed Aggregate Expenditures, Open Economy, Billions Real Domestic Output (GDP = DI), Billions Exports, Billions Imports, Billions Net Exports, Billions Economy, Billions $350 $390 $20 $40 400 430 20 40 450 470 20 40 500 510 20 40 550 550 20 40 600 590 20 40 650 630 20 40 700 670 20 40 Net exports = $ billion Equilibrium GDP = $ billion d. What is the multiplier in this example?
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6 If the marginal propensity to consume (MPC) is 0.40, the expenditure multiplier will be equal to _______ . (Enter your answer using ONE decimal place)
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