Achieve for Economics (1-Term Online)
Achieve for Economics (1-Term Online)
5th Edition
ISBN: 9781319372040
Author: KRUGMAN, Paul
Publisher: Macmillan Higher Education
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Chapter 24, Problem 15P
To determine

To determine: If the given countries experience diminishing returns to physical capital per worker.

Concept Introduction:

Gross Domestic Product (GDP): It refers to the gross money value or the gross market value of all the finished goods and the services produced by resident and nonresident people of a country that is within that particular within the borders of the country in an accounting year.

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Short Description Fiscal Policy   Graph Details Shown is a Fiscal Policy diagram with the variable Real GDP (billions of dollars) on the x-axis and the variable Price Level on the y-axis. The x-axis is scaled from 0 to 800 billion dollars with an increment of 40 billion dollars, and the y-axis is scaled from 30 to 150 units with an increment of 5 units.   Object Details On the graph we have:Four Line Objects:An upward sloping Aggregate Supply, AS line with two endpoints:Point 1 at (160, 70)Point 2 at (720, 140)A downward sloping Aggregate Demand, AD1 line with two endpoints:Point 1 at (80, 110)Point 2 at (640, 40)A vertical Long-run Aggregate Supply, LRAS with two endpoints:Point 1 at (400, 145)Point 2 at (400, 30)A downward sloping Aggregate Demand, AD line with two endpoints:Point 1 at (720, 60)Point 2 at (160, 130)Two Reference Points:Lines AS, AD, and LRAS intersect at (400, 100)Lines AS  and AD1 intersect at (280, 85) a. How much does aggregate demand need to change to restore the…
Fiscal Policy   Graph Details Shown is a Fiscal Policy diagram with the variable Real GDP (billions of dollars) on the x-axis and the variable Price Level on the y-axis. The x-axis is scaled from 0 to 1000 billion dollars with an increment of 50 billion dollars, and the y-axis is scaled from 0 to 180 units with an increment of 10 units.   Object Details On the graph we have:Four Line Objects:An upward sloping Aggregate Supply, AS line with two endpoints:Point 1 at (200, 40)Point 2 at (800, 160)A downward sloping Aggregate Demand, AD line with two endpoints:Point 1 at (200, 160)Point 2 at (800, 40)A downward sloping Aggregate Demand, AD1 line with two endpoints:Point 1 at (350, 170)Point 2 at (900, 60)A vertical Long-run Aggregate Supply, LRAS line with two endpoints:Point 1 at (500, 170)Point 2 at (500, 0)Two Reference Points:Lines AS and AD1 intersect at (600, 120)Lines AS, AD, and LRAS intersect at (500, 100) a. How much does aggregate demand need to change to restore the…
a. How much does aggregate demand need to change to restore the economy to its long-run equilibrium?        $  billion   b. If the MPC is 0.6, how much does government purchases need to change to shift aggregate demand by the amount you found in part a?        $  billion   Suppose instead that the MPC is 0.95.   c. How much does aggregate demand and government purchases need to change to restore the economy to its long-run equilibrium?        Aggregate demand needs to change by $  billion and government purchases need to change by $  billion.
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