PRINCIPLES OF MACROECONOMICS (LL)W/ACC.
7th Edition
ISBN: 9781264088980
Author: Frank
Publisher: MCG
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Chapter 13.A, Problem 13A.1CC
To determine
The intercept and slope of the expenditure line.
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Consider the following demand components:
Consumption described as a following: 120 million USD as an autonomous level of consumption plus 80% of disposable income spends on consumption.
I = 50
G=10
T= 25
Assuming goods market equilibrium, show equilibrium level of output in this economy:
How much output increase, if G increase from 10 to 20, show your calculations:
In an economy, autonomous consumption expenditure is $50 billion, investment is $200 billion, and government expenditure is $250 billion. Exports are $500 billion and imports are $450 billion. Assume that net taxes and imports are autonomous and price level is fixed.
a)What is the consumotion function?
b)What is the equation of the aggregate expenditure curve?
c)Calculate equilibrium expenditure.
d)Calculate the multiplier.
e)If investment decreases to $150 billion, what is the change in equilibrium expenditure ?
For the following economy, find autonomous expenditure, the multiplier, short-run equilibrium output, and the output gap. By how much would autonomous expenditure have to change to eliminate the output gap?
C
= 550 + 0.75 (Y – T )
I p
= 200
G
= 200
NX
= 60
T
= 180
Y*
= 3,400
Instructions: Enter your responses as absolute numbers. Autonomous expenditure: 875Multiplier: 4Short-run equilibrium output: 3500 There is (Click to select) an expansionary output gap in the amount of 100.(DO THIS PART) Autonomous expenditure would need to decrease by________ to eliminate the output gap.
Chapter 13 Solutions
PRINCIPLES OF MACROECONOMICS (LL)W/ACC.
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- For the following economy, find autonomous expenditure, the multiplier, short-run equilibrium output, and the output gap. By how much would autonomous expenditure have to change to eliminate the output gap? C = 550 + 0.75 (Y – T ) I p = 200 G = 200 NX = 60 T = 180 Y* = 3,400 Instructions: Enter your responses as absolute numbers. Autonomous expenditure: Multiplier: Short-run equilibrium output: There is (Click to select) an expansionary no a recessionary output gap in the amount of .Autonomous expenditure would need to (Click to select) increase decrease stay the same by to eliminate the output gap.arrow_forwardCan you completely this question?arrow_forwardConsider an economy that is characterized by the following equations: C= 400 + 0.5 Yd I = 700 - 4000i + 0.1y G= 200 T= 200 (M/P)d - = 0.75Y - 7500€ (MP)== 600 What is the equilibrium consumption (C)?arrow_forward
- The following table shows consumption (C), investment spending (I), and government purchases (G), for some hypothetical economy at several levels of income (reported in billions of dollars of real GDP). Assume that in this economy, income is taxed at a rate of 25%, base consumption is $50 billion, and that the marginal propensity to consume (MPC) is 0.667, or 2/3. Further assume that this economy is closed, that is, there is no international trade and so net exports are always equal to zero. Use the given information to fill in disposable income, consumption, and planned expenditures in the following table. Income: Real GDP Disposable (After Tax) Income C Ip G Planned Expenditures (Billions of dollars) (Billions of dollars) (Billions of dollars) (Billions of dollars) (Billions of dollars) (Billions of dollars) 0 0 50 100 50 100 100 50 200 100 50 300 100 50 400 100 50 500 100 50…arrow_forwardThe graph models an economy in equilibrium with a real GDP of $180 billion. Suppose that consumers' expectations about future incomes change, causing unplanned inventory investment to increase by $30 billion. Shift the planned aggregate expenditure (AE) line to show the effect of this change. *Image* 1) This change will cause the equilibrium level of real GDP to a) decrease. b) remain unchanged. c) increase. 2) By how much will GDP change once the new equilibrium is reached? If GDP will decrease, be sure to include a negative sign. GDP change: $ ________ billionarrow_forwardThe following table shows consumption (C), investment spending (I), and government purchases (G), for some hypothetical economy at several levels of income (reported in billions of dollars of real GDP). Assume that in this economy, income is taxed at a rate of 25%, base consumption is $25 billion, and that the marginal propensity to consume (MPC) is 0.333, or 1/3. Further assume that this economy is closed, that is, there is no international trade and so net exports are always equal to zero. Use the given information to fill in disposable income, consumption, and planned expenditures in the following table. Income: Real GDP Disposable (After Tax) Income C Ip G Planned Expenditures (Billions of dollars) (Billions of dollars) (Billions of dollars) (Billions of dollars) (Billions of dollars) (Billions of dollars) 0 0 25 150 50 100 150 50 200 150 50 300 150 50 400 150 50 500 150 50…arrow_forward
- For the following economy, find autonomous expenditure, the multiplier, short-run equilibrium output, and the output gap. By how much would autonomous expenditure have to change to eliminate the output gap? C = 2,500 + 0.75 (Y – T ) I p = 1,500 G = 2,000 NX = 300 T = 1,500 Y* = 19,900 Instructions: Enter your responses as whole numbers. Autonomous expenditure: 5175Multiplier: 4Short-run equilibrium output: 20,700Output gap: (DO THIS PART)Autonomous expenditure would need to (Click to select) decrease increase by ____________to eliminate the output gap. (DO THIS PARTarrow_forwardConsider the following intertemporal consumption problem with one good and two periods. The quantity of the good consumed in period 1 and period 2 are q1 and q2. The price of each unit of the good is $1 in both periods. The consumer’s income is I1=10 in the first period and I2=12 in the second period. The consumer can borrow or save money at the interest rate of 50%, that is, r=0.50. The consumer’s utility function is u(q1,q2)= q1q2. The optimal choice of q1 is a. 9 b. 10 c. 11 And the consumer will: d. borrow 1 e. save 1 f. borrow 2 g, save 0arrow_forwardhow to read this function in word?arrow_forward
- QUESTION 5 The expenditure function is given by e(p,u) = (4p1P2u)/(p, + pɔ The Hisksian demand for good one, h, (p,u> is: Oa. h1(p,u) =| 2p2 Pi + P2)u (P2u Ob. hi(p,u) =| Pi 2p2 h (p,u) =| Pi(P1 + P2) Od. 2p2u hi(p,u)=- h1(p,u) = P1(P1 + P2).arrow_forwardConsider an economy where the aggregate planned expenditure (AE) components are given by: Consumption (C) = 1000 + 0.8Y Investment (I) = 200 Government Expenditure (G) = 250 Exports (Ex) = 400 Imports (Im) = 200 + 0.133Y Write the AE equation (simplified). Identify the autonomous component and the induced component. Graph the AE curve. Find and identify on the graph the equilibrium expenditure. Show on your graph the effect of an increase of 60 in government expenditure and find the new equilibrium expenditure. Find the expenditure multiplier.arrow_forwardIn the following table, you are given the following parameters for the economy of Atris: C = 100 + 0.85Y I = 300 G = 150 X = 60 IM = 10 + 0.05Y a) What is the value of expenditures equilibrium? b) What is the value of total leakages and injections at expenditures equilibrium? c) Suppose autonomous expenditure increases by $25. What is the new value of expenditure equilibrium?arrow_forward
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