What would be the level of saving if the real GDP (Y) were at $7 trillion? what is the level of desired investment at this level? What forces are at work at a real GDP of $7 trillion? What will be the equilibrium level of real GDP? FIGURE 14.16 A Problem on the Keynesian ModelAggregateexpenditures(AE = C+ I+ G)C +I+ G = AEC+IC$6.0$5.5$5.0450$4.0$6.0 $7.0 $9.0Real GDP,Y (in trillions)The intersection of income or output (AE) and aggregate expenditures (Y) = $9.0 trillion.%3!

Equilibrium is established where aggregate expenditure becomes equal to the output.

What would be the level of saving if the real GDP (Y) were at $7 trillion? what is the level of desired investment at this level? What forces are at work at a real GDP of $7 trillion? What will be the equilibrium level of real GDP

What would be the level of saving if the real GDP (Y) were at $7 trillion? what is the level of desired investment at this level? What forces are at work at a real GDP of $7 trillion? What will be the equilibrium level of real GDP

MACROECONOMICS FOR TODAY

10th Edition

ISBN:9781337613057

Author:Tucker

Publisher:Tucker

Chapter9: The Keynesian Model In Action

Section: Chapter Questions

Problem 3SQP

See similar textbooks

Related questions

Q: In the table below, there are no taxes (so that that real GDP equals disposable income) and no…

A: Marginal propensity to consume(MPC) can be understood as the change in consumption expenditure with…

Q: Level of investment goes up by 200. What happens with the level of GDP if you know that MPC = 0,8…

A: It is given that MPC=0.8 t=0.1

Q: US Real GDP fell by 9 percent during the 2nd quarter of 2020. Real investment spending fell by 16.9…

A: Investment implies consumption on capital spending, for example purchasing new machines, building…

Q: Assume an economy in which: (i) there are no exports and no imports, (ii) investors always want to…

A: The economy spends an amount of money referred to as aggregate expenditure. It is a fundamental…

Q: What is the level of saving if: The MPC equals .9, disposable income rises from $ 800 to $ 900, and…

A: The marginal propensity of consumption and savings is the proportion of the disposable income that…

Q: Show on a graph of the market for saving and investment the effect of the following. (The graph is a…

A: Loanable funds market helps determine the equilibrium interest rate and the quantity of loanable…

Q: Given the necessary increase in GDP of $360 and the MPC of 0.70, how much should we reduce taxes to…

A: The multiplier value depends on the marginal propensity consume. The higher the value of MPC ,…

Q: A $300 million decrease in investment spending will increase real GDP by more than $300 million. Is…

A: Gross domestic product is the final combination of goods and services in a country. GDP is an…

Q: 1. The rate of output and planned expenditures for the economy of Timbuktu are shown in the…

A: The model crafted by economist John Maynard Keynes underscores the role of government in guiding…

Q: If private investment increases by $1, real GDP increases by $4. What do we call this in economics?…

A: Real GDP is calculated as a sum of consumption, investment and government purchases in the closed…

Q: Assume that the level of autonomous consumption in an economy equals 400, the level of planned…

A: Given information The autonomous consumption is 400 Planned investment (I) is 200 MPC = 0.6…

Q: How much of a change in GDP will result if firms increase their level of investment by $8 billion…

A: To determine the change in GDP resulting from an increase in investment, we can use the concept of…

Q: by equa a. Suppose the government increases both taxes (7) and government purchase (Y) is fixed by…

A: The Marginal Propensity to Consume (MPC) is a concept in economics that represents the proportion of…

Q: The government of a country decides to double its current level of spending, causing real GDP to…

A: Gross domestic product (GDP): - GDP is the market value of all final goods and services produced in…

Q: The graph shows the output function, savings function, and depreciation function for an economy.…

A: The Solow Growth Model is a long-run growth model. At equilibrium, the investment rate is equal to…

Q: a. Fill in the missing numbers in the table. b. What is the break-even level of income in the…

A: Marginal propensity to consume refers to the sensitivity of change in the consumption level due to…

Q: 1) If investment spending depends on GDP, this is called induced investment? T/F 2) A change in…

A: When a good is manufactured with the use of factors of production, cost takes place for producing…

Q: A. Suppose the country of Freelandia has an MPC of .85 and a real GDP of $200 billion. If its…

A: Keynesianism has made strides in its ability to solve economic downturns by government intervention,…

Q: Explain and diagrammatically represent the shift in the DLF curve as a result of each of the…

A: “Since you have posted multiple questions, we will provide the solution only to the first question…

Q: To find aggregate planned expenditures, which of the following must be added to consumption…

A: There are four fundamental total uses that go into computing GDP: utilization by families, a venture…

Q: Real GDP Consumption Planned Investment Government Purchases Net Exports $5,000 $4,500 $500…

A: Economy is at equilibrium when aggregate supply is equal to aggregate demand (AD=AS).

Q: Answer the following questions: Instructions: Enter your answers rounded to the nearest whole…

A: MPC, marginal propensity to consume is the proportion of change in income that is spent on…

Q: What will be the impact on real GDP?

A: Investment determined independently of changes in income is known as Autonomous Investment. Marginal…

Q: Real GDP (Y) $14,000 $15,000 $16,000 $17,000 $18,000 The equilibrium level of GDP is $ billion. The…

A: Marginal Propensity to Consume, or MPC, is a term used in economics to describe how consumer…

Q: Why would an increase in planned investment increase real GDP, but an unplanned increase in…

A: An optimistic approach towards the future growth of an economy leads to an increase in planned…

Q: The fluctuations in the income level that result from changes in investment spending depend…

A: MPC is the marginal propensity to consume which is the ratio of percentage of change consumption…

Q: Assume that GDP ( y) is 6.000. Consumption (C) is given by the equation C= 600 + 06(Y-T). Investment…

A: Gross domestic product (GDP) is the standard measure of the value added created through the…

Q: Explain and compare the following terms: Saving intensity and break-even investment intensity.

A: In economics, saving is defined as the process a specific percentage of the annual income, which is…

Q: In the country of Krugman, a business spent $100 million building a factory. GDP eventually…

A: "Since you have asked multiple questions, we will solve first question for you .. If you want any…

Q: The following values represent country A C=$160, S=$40, T=$0, Y=$200 and I=$30, T=0 and G=0 The…

A: C=$160 S=$40 T=$0 Y=$200 I=$30, T=0 G=0 MPC =…

Q: Which of the following would be most likely to increase consumption spending? Selected answer…

A: The objective of the question is to identify which of the given scenarios would most likely lead to…

Q: Explain how each of the following actions will affect the level of planned investment spending and…

A: The correct answer is given in the second step.

Q: will a reduction in the real interest rate increase investment spending, other things equal? Why is…

A: ‘Real interest rate(r)’ is referred to a rate that is adjusted to eliminate the inflation effect.…

Q: Suppose investment spending increases by $50 billion and as a result the equilibrium income…

A: "Marginal propensity to consume" is referred to as MPC. It is a way to gauge how much of a…

Q: Assume potential GDP is 3,500 and actual GDP is 3,000. If the consumption function is C=100+0.5Yd ,…

A: The consumption function shows the positive relationship between consumption and disposable income.…

Q: The table shows disposable income and saving in an economy. Calculate consumption expenditure at…

A: 1. **Calculating Consumption Expenditure**: Consumption expenditure is the portion of disposable…

Q: ind the equilibrium level of GDP (income or V) demanded in an economy in which investment (1) is…

A: The economics as a study is based upon the idea that the economies, or the societies around the…

Q: Assume potential GDP is 4,000 and actual GDP is 3,000. If the consumption function is C=300+0.8Yd ,…

A: Potential GDP = 4,000 Actual GDP = 3,000

Q: If autonomous consumption is 400 and the multiplier is 4, the saving function is equal to * O S= 400…

A: Since you have asked multiple questions, we will solve the first question for you. If you want any…

Question

FIGURE 14.16 A Problem on the Keynesian Model
Aggregate
expenditures
(AE = C+ I+ G)
C +I+ G = AE
C+I
C
$6.0
$5.5
$5.0
450
$4.0
$6.0 $7.0 $9.0
Real GDP,
Y (in trillions)
The intersection of income or output (AE) and aggregate expenditures (Y) = $9.0 trillion.
%3!

Definition Video Definition Overall monetary value of all the complete or final services and goods that a country can produce within its domestic boundaries in a specific period. Video

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Introduction

VIEW

Answer

VIEW

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

Explain how to derive a total expenditures (TE) curve.
From March 2020 to March 2021, the US enacted three fiscal packages to stimulate the economy and support businesses and households following the dislocations of COVID19. The rationale for these temporary payments was based on the Keynesian consumption function, according to which an increase in income increases consumption spending and boosts the economy. The data shown in the chart on the next page for disposable income, with and without the stimulus payments, and personal consumption expenditures. While disposable income clearly rises substantially when the stimulus payments are included, personal consumption expenditures follows a different path, mimicking disposable income without the stimulus payments. Use economic theory to explain what is going on here, Billions of Dollars 22,000 Disposable Personal Income less Economic Impact Payments Disposable Personal Income with Economic impact Payments 20,000 Personal Consumption Expenditures 18,000 16,000 14,000 12,000 01 04 07 10 01 04…
1.Draw the graph of the Keynesian cross model as a comparison of planned and realized expenditures. What is the intercept of the planned expenditure line? What is its slope? If government expenditures would be a positive function of output, how would the Keynesian cross change?
True or False. If spending exceeds output, real GDP will decline as firms cut back on production.
Help The aggregate demand curve can be derived from the aggregate expenditures model as indicated by the fact that Multiple Choice an increase in the price level shifts the aggregate expenditures schedule upward and increases real GDP a decrease in the price level shifts the aggregote expenditures schedule downward and decreases real GDP a decreose in the price level shifts the aggregate expenditures scheduie upiward and decreases real GDP an increase in the price level shifts the eggregate expenditures schedule downverd and decreases real GDP
YAS 1548 + 19P - 12Poil YAD = 412 – 33P+ 26G %3D Suppose initially, the Poil = $86 per barrel and government spending is equal to $780. Part (a): Calculate equilibrium GDP and the price level. Part (b): Determine the magnitude of the simple multiplier if oil prices exogenously rise by $1. Part (c): Determine the magnitude of the simple multiplier if government spending exogenously increases by $1.
Given the following consumption function, C = 400 + 0.75YD,where C= consumption expenditure, YD = disposable income, Investment= $1200, Government spending = $1600,Exports = $500, Imports = $600, Taxes = $1200 and Potential GDP = $9000Choose corrcct optiona) Aactual output is less than potential outputb) actual output is zeroc) actual output is equal to potential outputd) actual output is higher than potential output
The current state in the economy are as follows; Autonomous Consumption: 9000, Marginal Propensity to Consume: 0.4, Investment: 10000, Government Spending: 30000, Net Exports: 5000, Income Tax rate: 25%. The government wishes to conduct an injection into the economy to achieve a 45000 increase in national income. Calculated the current equilibrium income in the economy The government increases spending by 30000. Does this achieve the desired increase of 45000? How much should the government increase its spending to achieve the 45000 increase in national income (to the nearest whole number)? (Hint: consider the what the multiplier in this economy is)
YAS = 742 + 15 P- 28Poil YAD = 478 - 45P + 18G Suppose initially, the Poil = $93 per barrel and government spending is equal to $630. %3D Part (a): Calculate equilibrium GDP and the price level. Part (b): Determine the magnitude of the multiplier if oil prices exogenously rise by $1. Part (c): Using 2 to 3 sentences, provide a theoretical explanation for why the multiplier you calculated in part (b) is smaller (in absolute value) than the simple multiplier. Hint: you should be mentioning how the price level impacts AE and AD variables. Part (d): Determine the magnitude of the multiplier if government spending exogenously increases by $1. Part (e): Using 2 to 3 sentences, provide a theoretical explanation for why the multiplier you calculated in part (d) is smaller than the simple multiplier. Hint: you should be mentioning how the price level impacts AE and AD variables.
Suppose MPC equals 0.9, government taxes 30% of all incomes, and the marginal propensity to import equals 0.07. The economy's real GDP is currently $5,454 billion while its potential real GDP is $6,000 billion. Glven a horizontal SRAS curve, what change in government spending on goods and services would bring the economy to full employment real GDP? When doing the calculations, round the value for the multiplier to 2 decimal places, and round your final value for the change in G to the nearest billion.
Autonomous consumption = R100mInvestment spending = R300mGovernment spending = R200 millionExports = R150 millionAutonomous imports = R100 millionMarginal propensity to consume =2/3Tax rate = 1/10Marginal propensity to import = 1/10Yf = R2 150 millionQ.1.1 Calculate the level of autonomous spending in this economy. (2)Q.1.2 Calculate the size of the multiplier. (3)Q.1.3 Calculate the equilibrium level of income. (2)Q.1.4 Calculate the change in government spending required to reach full employmentin the economy.