001105Price level(CPT)10510088Fulemployment.50 [51Real GDPAD₂AD(trillions of dollars per year)Suppose the economy in Exhibit 11-2 is in equilibrium at point E, and the marginal propensity to consume (MPC) is 0.75. FollowingKeynesian economics, the federal government can move the economy to full employment at point E₂ by:

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Answered: 00 110 5 Price level (CPT) 105 100 88…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The aggregate demand function: yad =C+1+G₁ = 500+ 0.75Y is plotted on the graph to the right. The graph also shows the 45° line where aggregate output Y equals aggregate demand yad for all points. What happens to aggregate output if government spending rises by 100? The equilibrium level of output rises by $ billion. (Round your response to the nearest billion.) Consumption Expenditure, C ($ billions) 3000- 2800- 2600- 2400- 2200- 2000- 1800- 1600- 1400- 1200- 1000- 800- 600- 400- 200- 0- 0 yad =C+I+G₁ = 500 +0.75Y Y = yad 45° 400 800 1200 1600 2000 2400 2800 Disposable Income ($ billions)
Suppose the economy of Apple Republic is represented by the following equations: Z = C +|+ G C = 500 + .5YD T= 600 |= 300 YD = Y - T G = 2000 (Enter number only into the boxes) a. Given the above variables, calculate the equilibrium level of output (Y) disposable income (Yp) and consumption (C) Hint: First specify (using the above numbers) the demand equation (Z) for this economy. Second, using the equilibrium condition, equate this expression with Y. Once you have done this, solve for the equilibrium level of output (Y). Third, once you get Y, you can T from Y to get Yp. Finally, once you get Yp, you substitute it into the consumption equation to get consumption (C). b. Now, assume that government spending decreases from 2000 to 1900. What is the new equilibrium level of output (Y) ? What is the multiplier for this economy c. Now, assume that G is still at 2000, but taxes increase from 600 to 700. What is the new equilibrium level of output (Y) ? What is the multiplier for this…
MC Qu. 67 Refer to the graph shown. A.... Refer to the graph shown. Output Time A trough will be arrived at when the economy moves from point OB to point C A to point B C to point D OB to point D
Price level (CPT) 110 105 100 95 AS Ful employment, 50 151 Real GDP AD₁ (trillions of dollars per year) Suppose the economy in Exhibit 11-2 is in equilibrium at point E, and the marginal propensity to consume (MPC) is 0.75. Following Keynesian economics, the federal government can move the economy to full employment at point E₂ by: A increasing government tax revenue by approximately $33 billion. B decreasing government tax revenue by $100 billion. increasing government tax revenue by $100 billion. decreasing government tax revenue by $750 billion. decreasing government tax revenue by approximately $33 billion.
Assume that the economy is now governed by a government and begins trading with other economies. The economy is described by the following set of equations. ?=1000+0.5⋅?d ID = 600 G=700 T=400 EX=0.1⋅Y IM=100+0.1⋅Y YD = Y - T Calculate the equilibrium level of output Y* a) 2857 b) 4000 c) 6274 d) 4400 Whats the government expenditure multiplier? Whats the tax multiplier? Whats the ba;anced budget multiplier?
Explain the relationship between MPL and MC
a) About Country A, what is your estimate of the country's marginal propensity to consume (MPC) based on the following information on its GDP (Y) and the components thereof (in billion dollars) for two past years? Show calculation. Year 1 Year 2 c) GDP C I 11200 8000 2200 12000 8500 2400 G 800 880 The next few parts are about Country B, whose government plans to cut taxes by $24 billion as a measure to fight the current recession. The marginal propensity to consume (MPC) in Country B is known to be 34. There will be no crowding-out effect. e) NX 200 220 b) What is the initial effect (in billion dollars) of the tax cut on Country B's aggregate demand? (The "initial effect" here refers to the effect on AD after only the first round of increased spending.) What is the total effect of the tax cut on aggregate demand? Explain why it is different from the initial effect. d) How does the total effect of this $24 billion tax cut compare to the total effect of a $24 billion increase in…
Country X's long run full employment level of Real GDP is estimated to be $22,900,000. However, the actual Real GDP equals to $17,900,000. Data also shows that in country X's Marginal Propensity to Consume (MPC) is calculated to be 91% (0.91). Answer the following questions. 1. Vite !!! II!. S V M Sie nou! Dunn? -ncit. CUICUI 12 Mure N IV. Explain what the income multiplier value you obtained in part III means. V. If Real GDP gap in the neighboring country Y is $5,550,000, with income multiplier 9.2, by how much should country Y's "Autonomous consumption" (i.e. spending) change to close the $5,550,000 gap?
Autonomous Consumption R535mMarginal propensity to consume is 0.75Investment Spending R322mGovernment Spending R300mImports R175m + 0.08YExports R283mTaxes = 0.1YFull employment level of output is R3 483m Calculate the value of induced imports in thiseconomy, given the equilibrium level of output.
President Biden recently boasted of his administration’s success in lowering the deficit of the US government. This reduction could be considered “budget austerity”. Budget austerity usually involves a reduction in federal government spending and/or the raising of taxes to keep the budget deficit under control. Assume that just as austerity was beginning that we found the economy at a level of Ye that was below full employment (Ye < YN), as we did in the first two quarters of 2022. Illustrate graphically using the simple expenditure model developed in class what austerity will mean when for the level of planned spending when we start at Ye<YN, in theory, for the level of planned spending and equilibrium output as it takes effect. Lastly, given the movement you show in planned spending, if any, does the policy of austerity make sense if your goal is use policy to achieve YN? Explain.
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
An economy is described by the following: C=20+0.9Y I=120-200r. Md=250+0.2Y-400r. Ms/P=1250 Y=70 W=17.5 Lf=144 a) Find AS and AD. b) Find the equilibrium level of Y and P c) Graphically represent this economy d) Find the long-run Y of this economy. e) What is the level of government expenses G, the government needs to impose in order to lead the economy to the full employment? (Show the long-run graphically).

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