The graph gives an economy's AE curve when the economy isin long-run equilibrium. Equilibrium expenditure is $12 trillion.Draw a new AE curve that shows the effect of an increase ininvestment. Label it AE₁.Draw a point at the new equilibrium expenditure.Label it B.Draw another AE curve that shows equilibrium expenditure inthe short run. Label it AE2.Draw a point at the short-run equilibrium. Label it C.Finally, draw the AE curve when the economy returns tolong-run equilibrium. Label it AE3.1614-12-10-10Aggregate expenditure (trillions of 2009 dollars)A45 degree line11121314Real GDP (trillions of 2009 dollars)Click the graph, choose a tool in the palette and follow the instructions to create your graph.15AE1617

Aggregate expenditure refers to the total amount of spending in an economy over a specific period,…

The graph gives an economy's AE curve when the economy is in long-run equilibrium. Equilibrium expenditure is $12 trillion. Draw a new AE curve that shows the effect of an increase in investment. Label it AE₁. Draw a point at the new equilibrium expenditure. Label it B. Draw another AE curve that shows equilibrium expenditure in the short run. Label it AE₂. Draw a point at the short-run equilibrium. Label it C. Finally, draw the AE curve when the economy returns to long-run equilibrium. Label it AE. 16 14- 12- 10-k 10 Aggregate expenditure (trillions of 2009 dollars) 45 degree line 11 15 12 13 14 Real GDP (trillions of 2009 dollars) AE 16

The graph gives an economy's AE curve when the economy is in long-run equilibrium. Equilibrium expenditure is $12 trillion. Draw a new AE curve that shows the effect of an increase in investment. Label it AE₁. Draw a point at the new equilibrium expenditure. Label it B. Draw another AE curve that shows equilibrium expenditure in the short run. Label it AE₂. Draw a point at the short-run equilibrium. Label it C. Finally, draw the AE curve when the economy returns to long-run equilibrium. Label it AE. 16 14- 12- 10-k 10 Aggregate expenditure (trillions of 2009 dollars) 45 degree line 11 15 12 13 14 Real GDP (trillions of 2009 dollars) AE 16

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 graph gives an economy's AE curve when the economy is in long-run equilibrium. Equilibrium expenditure is $12 trillion. Draw a new AE curve that shows the effect of an increase in investment. Label it AE₁. Draw a point at the new equilibrium expenditure. Label it B. Draw another AE curve that shows equilibrium expenditure in the short run. Label it AE2. Draw a point at the short-run equilibrium. Label it C. Finally, draw the AE curve when the economy returns to long-run equilibrium. Label it AE3. 16- 14- 12- 10- Aggregate expenditure (trillions of 2012 dollars) 10 A 45 degree line AEO 15 11 12 13 14 Real GDP (trillions of 2012 dollars) >>> Draw only the objects specified in the question. 16
New help with D, E, F, G
Explain the effects of the following actions on equilibrium income, assuming that the marginal propensity to consume is 0.8 A. Government purchases rise by $40 billion B. Taxes fall by $40 billion.
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.
d. Now G assumes its original value of G = 800. Congress decreases the tax rate from (1/2) to (1/4). i) Use a model to sketch the effect of the decrease in the tax rate when the price level is held constant. ii) What is the new marginal propensity to consume? iii) Calculate the new equilibrium level of income.
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.
Consider two closed economies that are identical except for their marginal propensity to consume (MPC). Each economy is currently in equilibrium with real GDP and total expenditure equal to $100 billion, as shown by the black points on the following two graphs. Neither economy has taxes that change with income. The grey lines show the 45-degree line on each graph. The first economy's MPC is 0.5. Therefore, its initial total expenditure line has a slope of 0.5 and passes through the point (100, 100). The second economy's MPC is 0.70. Therefore, its initial total expenditure line has a slope of 0.70 and passes through the point (100, 100). Now, suppose there is an increase of $30 billion in investment in each economy. Place a green line (triangle symbol) on each of the previous graphs to indicate the new total expenditure line for each economy. Then place a black point (plus symbol) on each graph showing the new level of equilibrium output.
The tax rate is 0.4. The marginal propensity to import is 0.5 . When real GDP increases from $20,000 to $20,198, consumption increases from $18,000 to $18,050. What is the marginal propensity to consume?
Suppose that country Y is identical to country Z, with the exception that country Y's population has a lower marginal propensity to consume than country Z. Initially, both countries have the same level of real GDP. The diagram shows the expenditure curve for country Y. Using the line drawing tool, draw the expenditure curve of country Z in Figure 1. Label your curve 'Ez'. Carefully follow the instructions above and only draw the required object. Figure 1 Planned Expenditure ($, trillions) Real GDP, Y ($, trillions) Ex Select ✓ Line
calculate the expenditure multiplier, if the marginal propensity to consume = .80, the tax rate = .25 and the marginal propensity to import = .1