Use the information in the following table to answer the questions below. Assume you are dealing with short-run aspects of the economy, so the marginal propensity to consume is constant. Also, for simplicity, assume this economy has no taxes. In your answers, expain brifly how did you get the numerical result. Real GDP Consumption Planned Investment Government Purchases Net Exports $9,000 $7,800 $1,500 $1,000 -$700 $10,000 $8,600 $1,500 $1,000 -$700 $11,000 $9,400 $1,500 $1,000 -$700 $12,000 $10,200 $1,500 $1,000 -$700 $13,000 $11,000 $1,500 $1,000 -$700 $14,000 $11,800 $1,500 $1,000 -$700 (a) What is the equilibrium level of real GDP in this economy? (b) Compute the marginal propensity to consume. (c) Compute the government expenditures multipler.
Use the information in the following table to answer the questions below. Assume you are dealing with short-run aspects of the economy, so the marginal propensity to consume is constant. Also, for simplicity, assume this economy has no taxes. In your answers, expain brifly how did you get the numerical result. Real GDP Consumption Planned Investment Government Purchases Net Exports $9,000 $7,800 $1,500 $1,000 -$700 $10,000 $8,600 $1,500 $1,000 -$700 $11,000 $9,400 $1,500 $1,000 -$700 $12,000 $10,200 $1,500 $1,000 -$700 $13,000 $11,000 $1,500 $1,000 -$700 $14,000 $11,800 $1,500 $1,000 -$700 (a) What is the equilibrium level of real GDP in this economy? (b) Compute the marginal propensity to consume. (c) Compute the government expenditures multipler.
Macroeconomics: Principles and Policy (MindTap Course List)
13th Edition
ISBN:9781305280601
Author:William J. Baumol, Alan S. Blinder
Publisher:William J. Baumol, Alan S. Blinder
Chapter8: Aggregate Demand And The Powerful Consumer
Section: Chapter Questions
Problem 8DQ
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Use the information in the following table to answer the questions below. Assume you are dealing with short-run aspects of the economy, so the marginal propensity to consume is constant. Also, for simplicity, assume this economy has no taxes. In your answers, expain brifly how did you get the numerical result.
Real |
Consumption | Planned Investment |
Government Purchases |
Net Exports |
$9,000 | $7,800 | $1,500 | $1,000 | -$700 |
$10,000 | $8,600 | $1,500 | $1,000 | -$700 |
$11,000 | $9,400 | $1,500 | $1,000 | -$700 |
$12,000 | $10,200 | $1,500 | $1,000 | -$700 |
$13,000 | $11,000 | $1,500 | $1,000 | -$700 |
$14,000 | $11,800 | $1,500 | $1,000 | -$700 |
(a) What is the equilibrium level of real GDP in this economy?
(b) Compute the marginal propensity to consume.
(c) Compute the government expenditures multipler.
(d) Suppose net export increases by $400 (Assuming MPC, Gevernment Purchases, and Planned Investment are the same). What will be the new equilibrium level of GDP? Consumption?
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