Macroeconomics (MindTap Course List)
10th Edition
ISBN: 9781285859477
Author: William Boyes, Michael Melvin
Publisher: Cengage Learning
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Question
Chapter 10, Problem 14E
To determine
To compute:
The value of new equilibrium level of real GDP when the government spending increases by $15.
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What is the relative importance of government spending (G) in aggreagte demand and some factors that affect it?
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THE AGGREGATE EXPENDITURE MODEL (IN THE SHORT RUN)YOU MUST SHOW YOUR CALCULATIONS IN THE SPACE BELOWFOR THE NEXT PROBLEM USE THE FOLLOWING FORMULA:CHANGE IN GDP = [ 1 / (1-MPC) ] * CHANGE IN GInitially, the economy is producing $13 trillion in goods and services and the government is spending $2 trillion.Then the government decides to increase its spending to $2.7 trillion.
What is the value of the spending multiplier?
Chapter 10 Solutions
Macroeconomics (MindTap Course List)
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- answer quicklyarrow_forwardBriefly discuss the following concepts iv. Government expenditure multiplierv. Potential outputarrow_forwardY C I G X $ 100 $ 120 $ 20 $ 30 $ 10 $ 300 $ 300 $ 20 $ 30 - $ 10 $ 500 $ 480 $ 20 $ 30 - $ 30 $ 700 $ 660 $ 20 $ 30 - $ 50 14.If government spending increases by $ 15, what is the new equilibrium level of the real GDP? If government spending increases by $ 15 then to find the new equilibrium I can use the recessionary GAP formula Recessionary GAP = GDP Gap / Spending Multiplier (5) 15 = GDP Gap (5) 5 75 = GDP Gap GDP Gap + Old equilibrium level of the real GDP =…arrow_forward
- Use the following equations for exercises 16–18. C= $100+.8Y I= $200 G= $250 X = $100.2Yarrow_forwardK The following equations describe consumption, investment, government spending, taxes, and net exports in the country of Economika. In Economika, equilibrium GDP is equal to $. (Round your asnwer the nearest dollar.) If real GDP in Economika is currently $4,850, which of the following is true? A. There will be an unplanned decrease in inventories, and real GDP will increase next period. OB. There will be an unplanned increase in inventories, and real GDP will increase next period. OC. There will be an unplanned decrease in inventories, and real GDP will decrease next period. O D. There will be an unplanned increase in inventories, and real GDP will decrease next period. OE. There will be no unplanned change in inventories, and real GDP will stay the same next period. C=200+0.80(Y-T) 1=400 G=350 T=350 X = 100arrow_forwardIf there is an increase in government spending how can you solve the change in equilibrium Y? What's the formula?arrow_forward
- The following graph shows the aggregate expenditures line (AE) for an economy where current equilibrium output is $400 billion and full-employment output is $650 billion. AGGREGATE EXPENDITURES (Billions of dollars) 800 700 600 500 400 300 200 100 0 0 100 45-degree line 200 300 400 500 600 REAL GDP (Billions of dollars). The economy is experiencing a require a s billion AE Full-employment GDP 800 700 AE ? billion. To close the GDP gap would GDP gap with the absolute value of the gap equal to s in government spending. Thus the spending multiplier for this economy is On the graph, shift the AE line to show the change in the aggregate expenditures line necessary to close the GDP gap.arrow_forwardIf the MPC is 0.9 what will happen to GDP if the government cut spending bt $2.arrow_forwardAggregate Expenditures 800 600 400 200 0 15 04 Income Refer to the above graph to answer this question. What is the value of the multiplier in this economy? 200 400 600 800 1000 167 A AE 02 O Cannot be determined.arrow_forward
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