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- Country X's long run full employment level of Real GDP is estimated to be $22,900,000. However, the actual Real GDP equals to $17,900,000. Data also shows that in country X's Marginal Propensity to Consume (MPC) is calculated to be 91% (0.91). Answer the following questions. 1. Vite !!! II!. S V M Sie nou! Dunn? -ncit. CUICUI 12 Mure N IV. Explain what the income multiplier value you obtained in part III means. V. If Real GDP gap in the neighboring country Y is $5,550,000, with income multiplier 9.2, by how much should country Y's "Autonomous consumption" (i.e. spending) change to close the $5,550,000 gap?You are studying an economy with an income tax rate, t1, of 32%and an MPS of 0.3. It is currently suffering from a “recessionary gap” of $500 m. (i.e., Eqm Y<Y full employment, FE, aka Yn). Make the necessary calculations for the topolicythat it should institute; who does what? Provide the full name of this policy. Compare this economy to one without income taxes to explain the term “automatic stabilizer.”[Hint: Let I change and compare the I multipliers in each of these economies.] \The Bureau of Labor Statistics has found that the base-year expenditures of the typical consumer break down as follows: Food and beverages Housing Apparel and upkeep Transportation Medical care Entertainment Other goods, and services Total 17.8% 42.8% 6.3% 17.2% 5.7% 4.4% 5.8% 100.0% Suppose that since the base year, the prices of food and beverages have increased by 2 percent, the price of housing has increased by 4 percent, and the price of medical care has increased by 6 percent. Other prices are unchanged. Instructions: Enter your responses by rounding the CPI to three decimal places. The CPI for the current year is
- How does the increase in interest rates raise the chances of a recession? How can we expect the increase in interest rates to affect the consumption of the poorest 20% and richest 20% of households?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.What does it mean when the aggregate expenditure line crosses the 45-degree line? In other words, how would you explain the intersection in words?
