The levels of real disposable income and aggregate expenditures for an economy are given in the following table. -- Usethe blue points (circle symbol) to plot the expenditures line for this economy on the following graph. Line segments willautomatically connect the points. The black line represents the 45-degree line, where aggregate expenditures equal realGDP. Use the black point (plus symbol) to indicate equilibrium real GDP. - - In the previous graph, if the economyproduces at an output level that is higher than equilibrium GDP, then the economy is in because aggregate expendituresare real GDP, and unplanned inventory investment isRead GDP (Y)Aggregate Expenditures (AE)(Trillions of dollars per year) (Trillions of dollars per year)0111.7522.533.254454.7565.576.2587Use the blue points (circle symbol) to plot the expenditures line for this economy on the following graph. Line segments will automatically connect thepoints. The black line represents the 45-degree line, where aggregate expenditures equal real GDP. Use the black point (plus symbol) to indicateequilibrium real GDP.Aggregate Expenditures (Trillions of dollars per year)01result, real GDP will2345678Real GDP (Trillions of dollars per year)AE = YAggregate ExpendituresEquilibrium Real GDPH(?)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 isAs a

The alignment of the aggregate expenditure line with the 45-degree line, symbolizing parity with…

Read GDP (Y) (Trillions of dollars per year) 0 1 2 Aggregate Expenditures (AE) (Trillions of dollars per year) 1 1.75 2.5 3.25 4 5 3 4 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 45-degree line, where aggregate expenditures equal real GDP. Use the black point (plus symbol) to indicate equilibrium real GDP. Aggregate Expenditures (Trillions of dollars per year) AE=Y 0 1 2 3 4 5 6 7 8 Real GDP (Trillions of dollars per year) Aggregate Expenditures + 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 result, real GDP will As a

Read GDP (Y) (Trillions of dollars per year) 0 1 2 Aggregate Expenditures (AE) (Trillions of dollars per year) 1 1.75 2.5 3.25 4 5 3 4 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 45-degree line, where aggregate expenditures equal real GDP. Use the black point (plus symbol) to indicate equilibrium real GDP. Aggregate Expenditures (Trillions of dollars per year) AE=Y 0 1 2 3 4 5 6 7 8 Real GDP (Trillions of dollars per year) Aggregate Expenditures + 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 result, real GDP will As a

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter9: Demand-side Equilibrium: Unemployment Or Inflation?

Section9.A: The Simple Algebra Of Income Determination And The Multiplier

Problem 4TY

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3. Suppose an economy had aggregate demand components with the following relationships: Consumption Spending, C-140 +0.60*(DY) Investment Spending, I-25 +0.15"Y Government Spending, G-0 Net Export Spending, X=0 Tax Collections, Tx = 0 a. What is the equilibrium income for this economy (Show your work)? b. If the Government decided to Increase G spending by 6, what would be the new equilibrium income for this economy (Show your work)? Page 2 bed tooing c. If instead the Government decided to Reduce Tx (taxes) by 10 (i.e., send checks to people), what would be the new equilibrium income for this economy (Show your work)? d. If instead the Government decided to Increase G spending and Increase Tx (taxes) by 20, what would be the new equilibrium income for this economy (Show your work)?
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. Compute the new equilibrium level of output. Assume that the marginal propensity to consume is 0.7 (MPC=0.7).
Suppose an economy with the following characteristics.Y = Real GDP or national incomeT = Taxes = 0.3YC = Consumption = 140 + 0.9(Y – T)I = Investment = 400G = Government spending = 800X = Exports = 600M = Imports = 0.15YGiven the information above What is the equation for Aggregate Expenditures (AE) in this economy?
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?
Assume that, without taxes, the consumption schedule for an economy is as shown below: See picture Instructions: Round your answer to 1 decimal place.a. What is the size of the MPC given the data above? b. Graph this consumption schedule. Instructions: Use the tool provided 'C1' to draw the consumption schedule given in the table above (plot 7 points total). To earn full credit for this graph, you must plot all required points for the given line, beginning with GDP = $100 billion. See Picture
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.
O Use the information in the following table to do exercises 8-15: 948 Y C $120 $300 $480 $700 sin $660 $100 $300 $500 JAZI I $20 $20 $20 $20 G $30 $30 $30 $30 X $10 -$10 -$30 -$50 1
Homework: Demand-Side Equilibrium: Unemployment or Inflation? The following graph shows the total expenditure line (TE) for an economy where current equilibrium output is $400 billion and potential output is $650 billion. REAL EXPENDITURE (Billions of dollars) § 2 600 500 400 300 200 100 0 0 100 45-degree ling 200 300 400 500 600 REAL GDP (Bilions of dollars) The economy is experiencing TE Potential GDP 700 800 TE equal to $ by billion. Thus, the value of the multiplier for this economy is billion. To close the output gap, government purchases could On the previous graph, shift the TE line to show the change in total expenditure necessary to close the output gap. Note: Select and drag the curve to the desired position. The curve will snap into position, so if you try to move a curve and it snaps back to its original position, just drag it a little farther.
. Suppose the United States economy is repre- sented by the following equations: Z = C + I + G, C = 500 + 0.75YD, T = 600, I = 300, YD = Y − T , G = 2000 Given the above variables, calculate the equilibrium level of output. assume that government spending decreases from 2000 to 1900. What is the new equilibrium level of output? How much does income change as a result of this event? What is the multiplier for this economy?
stlon 16 Troll Island is a small island nation that recently experienced an autonomous change in aggregate expenditures (AE). AE increased by 2 billion, and the marginal propensity to consume on Troll Island is equal to 0.6. What is the change in Troll Island's real GDP after the increase in AE? Enter your answer in billions of dollars, rounded to one place after the decimal. For example, an answer of $2,500,000 should be entered as 2.5. %24 billion
c. Given the original $20 billion level of exports, what would be net exports and the equilibrium GDP if imports were $10 billion greater at each level of GDP? Fill in the gray-shaded cells. Instructions: Enter your answers as a whole number. If you are entering any negative numbers be sure to include a negative sign (-) in front of those numbers. (1) (2) (3) (4) (5) (6) Aggregate Expenditures, Private Closed Aggregate Expenditures, Open Economy, Billions Real Domestic Output (GDP = DI), Billions Exports, Billions Imports, Billions Net Exports, Billions Economy, Billions $350 $390 $20 $40 400 430 20 40 450 470 20 40 500 510 20 40 550 550 20 40 600 590 20 40 650 630 20 40 700 670 20 40 Net exports = $ billion Equilibrium GDP = $ billion d. What is the multiplier in this example?
800 REAL EXPENDITURE (Billions of dollars) 600 500 400 K 300 200 100 Potential GDP 100 700 0 0 45-degree ling by 200 300 400 500 600 REAL GDP (Billions of dollars) The economy is experiencing TE 700 DOO -0- TE equal to S billion. Thus, the value of the multiplier for this economy is billion. To close the output gap, government purchases could On the previous graph, shift the TE line to show the change in total expenditure necessary to close the output gap. Note: Select and drag the curve to the desired position. The curve will snap into position, so if you try to move a curve and it snaps back to its original position, just drag it a little farther.