Use the Simple Classical Macroeconomic Model to answer this question. Suppose the economy enters a recession and the government decides to lower taxes to stimulate growth (from $3,500 to $3,000. What would happen to the level of GDP? a. 60,000 b. 16,500 c. 33,000 O d. 30,000
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- Suppose that every additional 3 percentage points in the investment rate boosts GDP growth by 1 percentage point. Assume also that all investment must be financed with consumer saving. Investment rate investment GDP. The economy is now characterized by Consumption: Saving (Investment): GDP: $7 trillion $ 2 trillion $9 trillion Instructions: Enter your responses as a whole number. If the goal is to raise the growth rate by 2 percentage points, a. by how much must investment increase? $ billion b. by how much must consumption decline? billionSuppose that disposable income consumption and saving in some countries are 200 billion, 150 billion and 50 billion respectively.  Next, assume that disposable income increases by 20 billion, consumption rises by 18 billion, in saving goes up by 2 billion. What is the economies MPC? It’s MPS? What was the APC before the increase in disposable income? After the increase? 4. a) Draw a TP-TE (or Keynesian cross) graph for South Africa. Suppose Real GDP is $425 billion while the Real GDP where TE=TP is $475 billions. total, Expenditure (billions) TE-TH HEL th I 1 45 425 Q2 475 Q1 TP - TE total Production (billions) b) If Real GDP is $425 billion, what will happen to inventories, to firm's production and to the Real GDP? Inventories will decrease and Production will increase GDP increases to $475 billion and real
- Question Can this be explained in a simple way? Thanks The following table illustrates a few rounds of the multiplier process for a 2 sector economy for an initial increase in exogenous planned investment of 50. delta PAE 50 35 24.5 17.15 delta y 50 35 24.5 17.15 What is the approximate value of the multiplier in this economy? 1.4 2.4 3.0 3.3 0.7 The first round effect on GDP comes for the increase in exogenous investment, but the subsequent rounds depend on the amount of the additional GDP/national income that is spent. This depends on the marginal propensity to consume. In round 2 we have 35 = c times 50. So c =0.7 and the multiplier is l/(l-0.7) = 3.3333 or approximately 3.3.c Suppose the real GDP in an economy is currently $320 billion, C is $160 billion, I is $50 billion, G is $32 billion, and Nx is $-20 billion. What can you say about the state of equilibrium in this economy? Will its real GDP rise, fall, or stay the same? Explain.1. Briefly define the following terms and explain the relationship 2. E between them: . Multiplier MPC ... Actual investment Planned investment Aggregate expenditure. Aggregate output ..... Real GDP .Aggregate income ... in CHAP habit. They have a rule that everyone saves exactly 25 percent of income. Assume that planned investment is fixed and remains at 75 billion Yuck dollars. You are asked by the business editor of the Weird Herald, the local newspaper, to predict the economic events of the next few months. By using the data given, can you make a forecast? What is likely to happen to inventories? What is likely to happen to the level of real GDP? Is the economy at an equilibrium? When will things stop changing? 7. T
- Suppose that disposable income, consumptio, and saving in some country are $ 200 billion, $ 150 billion, and $ 50 billion respectively. Next, assume that disposobal income increase by $ 20 billion, consumption rises by $ 18 billion, and saving goes up by $ 2 billion. a) What is the economy's MPC? What is its MPS? Instructions: Round your answers to 1 decimal place. b) What was the APC before the increase in disposable income? Instructions: Round your answer to 2 decimal places. What was the APC after the increase. ( round your answer to 3 decimal places).Suppose that every additional 3 percentage points in the investment rate boosts GDP growth by 1 percentage poi Assume also that all investment must be financed with consumer saving. Note: Investment rate= Investment/GDP The economy is currently characterized by Consumption: $7 trillion Saving (= Investment): $2 trillion = GDP: $9 trillion If the goal is to raise the growth rate by 2 percentage points, a. by how much must investment increase? b. by how much must consumption decline? PLEASE SHOW YOUR WORK. BILLIONS BILLIONSSuppose that every additional 3 percentage points in the investment rate boosts GDP growth by 1 percentage point. Assume also that all investment must be financed with consumer saving. Note: Investment rate = Investment/GDP The economy is currently characterized by Consumption: $11 trillion Saving (= Investment): $3 trillion GDP: $14 trillion If the goal is to raise the growth rate by 2 percentage points, a. by how much must investment increase? billion b. by how much must consumption decline? billion
- Real GDP Consumption Planned Investment Government Purchases Net Exports $5,000 $4,500 $500 $325 -125 6,000 5,300 $500 $325 -125 7,000 6,100 $500 $325 -125 8,000 6,900 $500 $325 -125 3 A Answer the questions based on the table below. The values are in millions of dollars. What is the equilibrium level of real GDP? What is the MPC? If potential GDP is $7,000 million, is the economy at full employment? If not, what is the condition of the economy? If the economy is not at full employment, by how much should government spending increase so that the economy can move to the full employment level of GDP?1- In a country, if the consumption is OMR 14000, exports OMR 5300, government purchases are OMR1500, imports are 3400, and investment is OMR 2800, What is the GDP for that year? ____________ Select one: a. OMR 22000 b. OMR 20002 c. OMR 20200 d. OMR 20020 2- Suppose that in a closed economy GDP is equal to 11,000, taxes are equal to 2,500 consumption equals 7,500 and government purchases equal 2,000 the outcome is private saving, public saving, and national saving is 1,000, 500, and 1,500, respectively. Select one: a. False b. True12. Suppose Congress wishes to reduce the budget deficit by reducing government spending. Use the AS-AD model to show what the impact will be of this change on GDP.