A10 Use the blue points (circle symbol) to plot the aggregate expenditures line for this economy. Line segments will automatically connect the points.1000900AE line800Equilibrium GDP700600500400REAL AGGREGATE EXPENDITURES (Billions of dollars)400500500700800REAL GDP (Billions of dollars)9001000 1. Aggregate expenditures and IncomeThe following table shows consumption (C), Investment (1), government spending (G), and net exports (X-M) in a hypothetical economy for variouslevels of real GDP (Y). Assume that the price level remains unchanged at all levels of income. All figures are in billions of dollars.Compute aggregate expenditures for each income level and fill in the last column In the following table.Yс1X-M Aggregate Expenditures500 300 150 200-100600 350150 200 -100700 400 150200-100800450 150 200-100900 500 150 200-100The following graph shows real GDP on the horizontal axis and aggregate expenditures (AE) on the vertical axis. The orange line (square symbols)represents a 45-degree (Y=AE) line.Use the blue points (circle symbol) to plot the aggregate expenditures line for this economy. Line segments will automatically connect the points,

Aggregate expenditure is the total consumption of final goods during an accounting year. AE=…

Use the blue points (circle symbol) to plot the aggregate expenditures line for this economy. Line segments will automatically connect the points. ? 1000 900 AE line Equilibrium GDP REAL AGGREGATE EXPENDITURES (Billions of dollars) B00 700 600 500 400 400 500 500 7001 800 REAL GDP (Billions of dollars) 900 1000

Use the blue points (circle symbol) to plot the aggregate expenditures line for this economy. Line segments will automatically connect the points. ? 1000 900 AE line Equilibrium GDP REAL AGGREGATE EXPENDITURES (Billions of dollars) B00 700 600 500 400 400 500 500 7001 800 REAL GDP (Billions of dollars) 900 1000

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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How would a dramatic increase in the value of the stock market shift the AD curve? What effect would the shift have on the equilibrium level of GDP and the price level?
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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) Real Domestic Output (GDP-DI), Billions $250 300 350 400 450 500 550 600 (2) Aggregate Expenditures, Private Closed Economy, Billions $290 330 370 410 450 490 530 570 billion Net exports = $ Equilibrium GDP=$ d. What is the multiplier in this example? (3) Exports, Billions billion $20 2222222 20 20 20 20 20 20 20 (4) Imports, Billions $40 40 40 40 40 40 40 40 (5) Net Exports, Billions (6) Aggregate Expenditures, Open Economy, Billions
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)?
Which of the following components makes up the largest percentage of GDP measured by aggregate spending? O imports O government purchases of goods and services consumer spending investment spending О ехрorts
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2. From what was learned in class, explain what the values of the slope and vertical intercept of the aggregate consumption function mean from an economic perspective. Income-expenditure equilibrium Using the data in the following table to complete the following questions. GDP YD Planned (billions of dollars) $0 $0 $200 $100 400 400 500 100 800 800 800 100 1,200 1,200 1,100 100 1,600 1,600 1,400 100 2,000 2,000 1,700 100 2,500 2,500 2,000 100 3,000 3.000 2,300 100 1. Complete the columns for AEPlanned and unplanned in the table. 2. What is the value of the MPC? 3. What is the aggregate consumption function? AE Planned Unplanned 4. What is the equation for the planned aggregate expenditure function? 4. 5. What is the value of income-expenditure equilibrium GDP, (Y*)? 6. Explain in economic terms what happens when not in the income-expenditure equilibrium? Both when GDP > AE planned and GDP < AE planned. For each situation what needs to happen to move the economy toward equilibrium?.
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