Economics (Irwin Economics)
21st Edition
ISBN: 9781259723223
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Question
Chapter 32.A, Problem 1ADQ
To determine
Aggregate Demand and Aggregate Expenditure Model and its relation.
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Figure: Aggregate Expenditures Curve II
Aggregate
expenditures
(per year)
$800
Reference: Ref 11-16
45-degree
line
AE
$2,000 Real GDP (per year)
(Figure: Aggregate Expenditures Curve II) The slope of the aggregate expenditures curve in the aggregate expenditures
model shown in this figure is:
O 45 degrees.
O 0.6.
O 0.5.
O 0.25.
In the Keynesian AE model, if the autonomous components of consumption,
investment, government spending, and net export spending total $100 billion,
and the MPC is 0.75, what will unplanned changes in inventory be when output is
$345 billion?
O-$4 billion
O $4 billion
O $5 billion
O -$5 billion
When output is higher than the intersection of the Keynesian AE and the 45-
degree line, which of the following can we expect to happen?
Osavings to be negative and consumption to fall
O inventories to rise and output to fall
O
inventories to fall and output to rise
consumers to expect higher incomes and consumption to rise
2.
L Give Up!
Suppose the Japanese economy has been experiencing slow growth. As a result, the Prime Minister, who thinks John Maynard
Keynes was the greatest economist ever, has decided to increase government spending. The Prime Minister asks the head of
the economic council to determine the increase in government spending necessary to bring the economy to full employment.
Assume there is a GDP gap of 1 trillion yen and the marginal propensity to consume (MPC) is 0.60.
What advice should the head of the economic council give the Prime Minister?
O The recessionary gap is equal to 400 billion yen.
O The inflationary gap is equal to 400 billion yen.
O The recessionary gap is equal to 625 billion yen.
O The inflationary gap is equal to 625 billion yen.
Chapter 32 Solutions
Economics (Irwin Economics)
Ch. 32.7 - Prob. 1QQCh. 32.7 - Prob. 2QQCh. 32.7 - Prob. 3QQCh. 32.7 - Prob. 4QQCh. 32.A - Prob. 1ADQCh. 32.A - Prob. 2ADQCh. 32.A - Prob. 1ARQCh. 32.A - Prob. 2ARQCh. 32.A - Prob. 1APCh. 32.A - Prob. 2AP
Ch. 32 - Prob. 1DQCh. 32 - Prob. 2DQCh. 32 - Prob. 3DQCh. 32 - Prob. 4DQCh. 32 - Prob. 5DQCh. 32 - Prob. 6DQCh. 32 - Prob. 7DQCh. 32 - Prob. 8DQCh. 32 - Prob. 9DQCh. 32 - Prob. 1RQCh. 32 - Prob. 2RQCh. 32 - Prob. 3RQCh. 32 - Prob. 4RQCh. 32 - Prob. 5RQCh. 32 - Prob. 6RQCh. 32 - Prob. 7RQCh. 32 - Prob. 8RQCh. 32 - Prob. 9RQCh. 32 - Prob. 1PCh. 32 - Prob. 2PCh. 32 - Prob. 3PCh. 32 - Prob. 4PCh. 32 - Prob. 5P
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- Refer to the information provided in Figure 1 below to answer the questions that follow Figure 1 AE 1,600 400 S450 1,600 Aggregate output, Y (billions of dollars) 10. Refer to Figure 1. Which of the following equations best represents the aggregate expenditure function? O AE = 1,200 + 0.8Y. %3D O AE 1,600 + 0.4Y. %3D O AE = 1,000 + 0.5Y. %3D AE = 400+ 0.75Y. Planned aggregate expenditure, AE (billions of dollars)arrow_forwardAggregate demand is defined as O the relationship between the total quantity of goods and services demanded and the income level, all other determinants of spending unchanged. the relationship between the total quantity of goods and services demanded and the price level, all other determinants of spending unchanged. the demand for goods and services generated by all sectors in the economy, holding price level constant. O the relationship between the total quantity of goods and services demanded and the supply of factors of production, all other determinants of production unchanged.arrow_forwardDiscuss the following statements: a. The Keynesian multiplier is higher the higher is the degree of openness of the economy'. b. 'There is no easy policy answer when it comes to dealing with a negative supply shock'. Consider the following economy. The production function is F(K,L) = K0.3 Lº.7. The saving rate and the depreciation rate are respectively: s = 0.10 and 8 = 0.07. Population growth is 1%, i.e. n = 0.01. c. Derive the capital accumulation equation for this economy. d. Find the steady state value of the capital stock per capita. e. Suppose that the initial capital stock per capita is: k = 1.5. Discuss the process of convergence of the economy to the steady state using the appropriate diagram. f. Calculate the optimal saving rate of the economy and discuss whether the economy at the steady state over or under-accumulates capital.arrow_forward
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