Economics For Today
10th Edition
ISBN: 9781337613040
Author: Tucker
Publisher: Cengage Learning
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Chapter 19, Problem 18SQ
To determine
The impact of the increase in the aggregate expenditure.
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4. In the economy of St. Maynard Island, autonomous
consumption expenditure is $185 million, and the
marginal propensity to consume is 0.75. Investment is
$150 million, government expenditure is $100 million,
and net taxes are $80 million. Investment, government
expenditure, and taxes are constant - they do not vary
with income. The island does not trade with the rest of
the world.
a) What is the consumption function?
b) What is the aggregate expenditure function?
c) What is the island's autonomous aggregate
expenditure?
d) What is the size of the multiplier in St. Maynard Island's
economy?
e) What is the island's aggregate planned expenditure and
what is happening to inventories when real GDP is
$1,100 million?
f) What is the economy's equilibrium aggregate
expenditure?
the following information about an economy (all amounts are in USD
billion)
C = 100 + 0.8YD
T= -150 +0.25Y
I* = 60
Consumption expenditure
Taxes
Autonomous Investment
Government Spending
G= 80
a) Calculate the equilibrium level of aggregat output (Y)
b) Calculate the the government expenditure multiplier on output
c) Suppose that the government spending is reduced by USD 5 billion, calculate the
new equilibrium level of aggregate output using the government expenditure
multiplier on output.
Refer to the table on the next page in answering the questions that follow:a. If full employment in this economy is 130 million, will there be an inflationary expenditure gap or a recessionary expenditure gap? What will be the consequence of this gap? By how much would aggregate expenditures in column 3 have to change at each level of GDP to eliminate the inflationary expenditure gap or the recessionary expenditure gap? Explain. What is the multiplier in this example?b. Will there be an inflationary expenditure gap or a recessionary expenditure gap if the full-employment level of output is $500 billion? Explain the consequences. By how much would aggregate expenditures in column 3 have to change at each level of GDP to eliminate the gap? What is the multiplier in this example? c. Assuming that investment, net exports, and government expenditures do not change with changes in real GDP, what are the sizes of the MPC, the MPS, and the multiplier?
Chapter 19 Solutions
Economics For Today
Ch. 19.4 - Prob. 1YTECh. 19 - Prob. 1SQPCh. 19 - Prob. 2SQPCh. 19 - Prob. 3SQPCh. 19 - Prob. 4SQPCh. 19 - Prob. 5SQPCh. 19 - Prob. 6SQPCh. 19 - Prob. 7SQPCh. 19 - Prob. 8SQPCh. 19 - Prob. 9SQP
Ch. 19 - Prob. 10SQPCh. 19 - Prob. 1SQCh. 19 - Prob. 2SQCh. 19 - Prob. 3SQCh. 19 - Prob. 4SQCh. 19 - Prob. 5SQCh. 19 - Prob. 6SQCh. 19 - Prob. 7SQCh. 19 - Prob. 8SQCh. 19 - Prob. 9SQCh. 19 - Prob. 10SQCh. 19 - Prob. 11SQCh. 19 - Prob. 12SQCh. 19 - Prob. 13SQCh. 19 - Prob. 14SQCh. 19 - Prob. 15SQCh. 19 - Prob. 16SQCh. 19 - Prob. 17SQCh. 19 - Prob. 18SQCh. 19 - Prob. 19SQCh. 19 - Prob. 20SQ
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