An economy has a marginal propensity to consume of 0.5, and Y*, the income-expenditure equilibrium GDP, cquals $500 billion. Given an autonomous increase in planned investment of $10 billion, answer the following questions. a. What is the value of the multiplier? Value of the multiplier = b. What would you cxpect the total change in Y* to be bascd on the multiplier formula? Change in Y* based on the multiplier = billion c. What is the total change in real GDP after the 10 rounds? It may be beneficial to make a table on a separate sheet of paper to calculate the change in real GDP for each of the rounds, and then add up the values.
An economy has a marginal propensity to consume of 0.5, and Y*, the income-expenditure equilibrium GDP, cquals $500 billion. Given an autonomous increase in planned investment of $10 billion, answer the following questions. a. What is the value of the multiplier? Value of the multiplier = b. What would you cxpect the total change in Y* to be bascd on the multiplier formula? Change in Y* based on the multiplier = billion c. What is the total change in real GDP after the 10 rounds? It may be beneficial to make a table on a separate sheet of paper to calculate the change in real GDP for each of the rounds, and then add up the values.
Chapter19: The Keynesian Model In Action
Section: Chapter Questions
Problem 5SQP
Related questions
Question
![Income and Expenditure – End of Chapter Problem
An economy has a marginal propensity to consume of 0.5, and Y*, the income-expenditure cquilibrium GDP, cquals $500
billion. Given an autonomous increase in planned investment of $10 billion, answer the following questions.
a. What is the value of the multiplier?
Value of the multiplier =
b. What would you cxpect the total change in Y* to be bascd on the multiplicr formula?
Change in Y* based on the multiplier =
billion
c. What is the total change in real GDP after the 10 rounds?
It may be beneficial to make a table on a separate sheet of paper to calculate the change in real GDP for each of the rounds,
and then add up the values.
c. What is the total change in real GDP after the 10 rounds?
It may be beneficial to make a table on a separate sheet of paper to calculate the change in real GDP for each of the rounds,
and then add up the values.
Total change in real GDP (10 rounds) =
billion
d. How do your answers to the change in GDP and Y compare?
The answer to total change in GDP after 10 rounds and the change in Y* based on the multiplier formula are](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F1d76af8a-f851-446b-83bf-183e717790fc%2F398cdddb-6871-42a8-a08d-99c7e9f2ca26%2Fnaz4cs9_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Income and Expenditure – End of Chapter Problem
An economy has a marginal propensity to consume of 0.5, and Y*, the income-expenditure cquilibrium GDP, cquals $500
billion. Given an autonomous increase in planned investment of $10 billion, answer the following questions.
a. What is the value of the multiplier?
Value of the multiplier =
b. What would you cxpect the total change in Y* to be bascd on the multiplicr formula?
Change in Y* based on the multiplier =
billion
c. What is the total change in real GDP after the 10 rounds?
It may be beneficial to make a table on a separate sheet of paper to calculate the change in real GDP for each of the rounds,
and then add up the values.
c. What is the total change in real GDP after the 10 rounds?
It may be beneficial to make a table on a separate sheet of paper to calculate the change in real GDP for each of the rounds,
and then add up the values.
Total change in real GDP (10 rounds) =
billion
d. How do your answers to the change in GDP and Y compare?
The answer to total change in GDP after 10 rounds and the change in Y* based on the multiplier formula are
Expert Solution
![](/static/compass_v2/shared-icons/check-mark.png)
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
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.Recommended textbooks for you
![Economics For Today](https://www.bartleby.com/isbn_cover_images/9781337613040/9781337613040_smallCoverImage.gif)
![MACROECONOMICS FOR TODAY](https://www.bartleby.com/isbn_cover_images/9781337613057/9781337613057_smallCoverImage.gif)
![MACROECONOMICS](https://www.bartleby.com/isbn_cover_images/9781337794985/9781337794985_smallCoverImage.gif)
![Economics For Today](https://www.bartleby.com/isbn_cover_images/9781337613040/9781337613040_smallCoverImage.gif)
![MACROECONOMICS FOR TODAY](https://www.bartleby.com/isbn_cover_images/9781337613057/9781337613057_smallCoverImage.gif)
![MACROECONOMICS](https://www.bartleby.com/isbn_cover_images/9781337794985/9781337794985_smallCoverImage.gif)
![ECON MACRO](https://www.bartleby.com/isbn_cover_images/9781337000529/9781337000529_smallCoverImage.gif)
![Macroeconomics: Principles and Policy (MindTap Co…](https://www.bartleby.com/isbn_cover_images/9781305280601/9781305280601_smallCoverImage.gif)
Macroeconomics: Principles and Policy (MindTap Co…
Economics
ISBN:
9781305280601
Author:
William J. Baumol, Alan S. Blinder
Publisher:
Cengage Learning
![Economics:](https://www.bartleby.com/isbn_cover_images/9781285859460/9781285859460_smallCoverImage.gif)