20. In the Keynesian model, a fall in the interest rate will shift the aggregate expenditure line down. have no effect on the aggregate expenditure line. shift the aggregate expenditure line up. This is correct move the economy along the aggregate expenditure line towards the left. move the economy along the aggregate expenditure line towards the right.
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- The figure below depicts the economy of Altrua, which is presently in equilibrium. Enter your responses below rounded to one decimal place. AS AD LAS 340 360 380 400 420 440 460 480 500 520 Price level a. The size of its recessionary gap is $ b. The size of this gap as a percentage of its actual GDP isWhat is the effect of an increase in investment? When investment increases, A. aggregate demand increases and income increases. The increase in income induçes an increase in consumption expenditure so aggregate demand increases by more than the initial increase in investment B. aggregate demand increases and aggregate supply increases C. aggregate demand increases by an amount equal to the increase in investment O D. aggregate supply increases. The increase in aggregate supply is greater than the increase in investment because capital increases, which increases potential GDP Click to select your answer. MacBook Air DII F11 F12 888 F10 F9 吕0 F7 F8 F6 F5 F4 esc F2 F3 F1 # $ delete @ 7 8 1 2 3 4 P Y Q W E R %3D tab つ K S D F G A aps lock M V B ootion * 00 I くOEquilibrium expenditure occurs where * The aggregate expenditure curve crosses the 45-degree line Planned expenditures exceed national income Savings exceed planned investment O All of the answers are correct O Option 5 Back Next
- Expenditure, E EA E E E₁ Y₁ Y₂ Y₁₂ Actual Expenditure Planned Expenditure Income, Output, Y 5. (Exhibit: Keynesian Cross) In this graph, the equilibrium levels of income and expenditure are: A) Y₁ and E₁ B) Y2 and E2 C) Y3 and E3 D) Y3 and E4 Please indicate clearly (through highlighting, underlying, etc.) and hand-write clearly or type-in an ar the following to receive full credit: A) Why is this response the right or wrong answer?Use the Keynesian cross to predict the impacton equilibrium GDP of the following. In eachcase, state the direction of the change and give aformula for the size of the impact.a. An increase in government purchasesb. An increase in taxesc. Equal-sized increases in both governmentpurchases and taxeswhich of the following would cause the aggregate expenditure line to shift downward? A Congress passes additional unemployment benefits. B Following the Covid 19 pandemic, households are pessimistic about their future income levels. C The government raises income taxes. D Housing prices rise. E Actions by the Federal Reserve cause real interest rates to rise. F An increase in income in Asia leads to growth of U.S. exports.
- Q3. Use the Keynesian cross model to predict the impact on equilibrium GDP of the following. In each case, state the direction of the change and give a formula for the size of the impact.a. An increase in government purchasesb. An increase in taxesc. Equal-sized increases in both government purchases and taxesPotential GDP 450 C+1+G+X-IM) F E T 4,000 5,000 6,000 Real GDP (billions of dollars per year) In Figure 11-1, the economy is experiencing a(n) inflationary gap equal to EF. recessionary gap equal to FT. inflationary gap equal to ET. recessionary gap equal to ET. Real ExpenditureThe graph gives an economy's AE curve when the economy is in long-run equilibrium. Equilibrium expenditure is $12 trillion. Draw a new AE curve that shows the effect of an increase in investment. Label it AE₁. Draw a point at the new equilibrium expenditure. Label it B. Draw another AE curve that shows equilibrium expenditure in the short run. Label it AE2. Draw a point at the short-run equilibrium. Label it C. Finally, draw the AE curve when the economy returns to long-run equilibrium. Label it AE3. 16 14- 12- 10- 10 Aggregate expenditure (trillions of 2009 dollars) A 45 degree line 11 12 13 14 Real GDP (trillions of 2009 dollars) Click the graph, choose a tool in the palette and follow the instructions to create your graph. 15 AE 16 17
- 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…The graph gives an economy's AE curve when the economy is in long-run equilibrium. Equilibrium expenditure is $12 trillion. Draw a new AE curve that shows the effect of an increase in investment. Label it AE₁. Draw a point at the new equilibrium expenditure. Label it B. Draw another AE curve that shows equilibrium expenditure in the short run. Label it AE2. Draw a point at the short-run equilibrium. Label it C. Finally, draw the AE curve when the economy returns to long-run equilibrium. Label it AE3. 16- 14- 12- 10- Aggregate expenditure (trillions of 2012 dollars) 10 A 45 degree line AEO 15 11 12 13 14 Real GDP (trillions of 2012 dollars) >>> Draw only the objects specified in the question. 16Which of the following is true of the change in the quantity of aggregate output demanded? a.The change in the quantity of aggregate output demanded depends only on how much the aggregate expenditure line shifts. b.The change in the quantity of aggregate output demanded depends only on the change in investment demand. c.The change in the quantity of aggregate output demanded depends only on the change in government spending. d.The change in the quantity of aggregate output demanded depends only on the change in interest rates.