PRINCIPLES OF MACROECONOMICS (LL)W/ACC.
7th Edition
ISBN: 9781264088980
Author: Frank
Publisher: MCG
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Chapter 13, Problem 8RQ
To determine
Explain the more effective fiscal policy measure to stimulate planned aggregate expenditure.
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The total expenditure schedule in Macroland begins with these initial levels (in billions of dollars): Income = 1,000; Consumption = 900; Investment = 200; Government = 300; Net Exports = −100. If the MPC = 0.75 and income increases in increments of 200, find the equilibrium level of income. If full employment requires an income level of 2,000, what (if anything) should the government do? Indicate both the direction of the spending change and the size of the spending change.
Match the following terms ( terms are labeled 1-10 )to the correct definition(definitions are labeled a through J)
aggregate consumption function, multiplier,
planned aggregate expenditure (PAE), income-expenditure equlibrium GDP, marginal propensity to consume (MPC), consumption function, unplanned inventory investment, actual investment spending,inventory, autonomous spending
A) The amount by which consumption rises when disposable income rise by one dollar
marginal propensity to consume (MPC)
B) The level of output (real GDP) at which output (real GDP) equals planned aggregate expenditure.
income-expenditure equlibrium GDP
C) The ratio of total change in real GDP caused by an autonomous change in aggregate spending.
multiplier
D) Total planned spending on final goods and services in the economy.
aggregate consumption function
E) The equation showing how individual household's consumer spending varies with its current disposable income.
consumption function
F) Consumption…
The levels of real disposable income and aggregate expenditures for an economy are given in the following table. -- Use
the blue points (circle symbol) to plot the expenditures line for this economy on the following graph. Line segments will
automatically connect the points. The black line represents the 45-degree line, where aggregate expenditures equal real
GDP. Use the black point (plus symbol) to indicate equilibrium real GDP. - - In the previous graph, if the economy
produces at an output level that is higher than equilibrium GDP, then the economy is in because aggregate expenditures
are real GDP, and unplanned inventory investment is
Read GDP (Y)
Aggregate Expenditures (AE)
(Trillions of dollars per year) (Trillions of dollars per year)
0
1
1
1.75
2
2.5
3
3.25
4
4
5
4.75
6
5.5
7
6.25
8
7
Use the blue points (circle symbol) to plot the expenditures line for this economy on the following graph. Line segments will automatically connect the
points. The black line represents the…
Chapter 13 Solutions
PRINCIPLES OF MACROECONOMICS (LL)W/ACC.
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