Unplanned inventory in the economy.

Question

Want to see more full solutions like this?

Answer 1

Question

Chapter 19, Problem 1SQP

(a):

To determine

Unplanned inventory in the economy.

(a):

Expert Solution

Explanation of Solution

The unplanned inventory investment can be calculated by subtracting the consumption from the real GDP and subtracting the autonomous investment from this value. In the first case, where the level of employment is 40 millions, the consumption is $300, whereas the real GDP is $325. The autonomous investment is $100. Thus, the unplanned inventory can be calculated as follows:

Unplanned inventory=(Real GDP−Consumption)−Autonomous investment=(325−300)−100=25−100=−75

Thus, the unplanned inventory in this case is -75. Similarly, the other case unplanned inventory can be calculated and the table can be completed as follows:

Possible levels of employment (millions of workers)	Real GDP (Output) equals disposable income (billions of dollars)	Consumption (billions of dollars)	Unplanned inventory (billions of dollars)
40	$325	$300	$-75
45	375	325	-50
50	425	350	-25
55	475	375	0
60	525	400	25
65	575	425	50
70	625	450	75

Economics Concept Introduction

Aggregate expenditure: Aggregate expenditure is the measure of the national income. Thus, it is the sum value of the final goods and services produced in the economy, which is measured by the summation of the expenditures made by the factors during the given period of time.

(b):

To determine

Marginal propensity to consume and save.

(b):

Expert Solution

Explanation of Solution

The marginal propensity to consume can be calculated by dividing the change in the consumption by the change in the disposable income. In the first place, when the consumption increases from $300 to $325, the change in the consumption is $25 billion. The real GDP was $325 and it changes to $375, which denotes the change in the disposable income by $50 billion. Thus, MPC can be calculated as follows:

Marginal Propensity to Consume=Change in consumptionChange in disposable income=$25billion$50billion=0.5

Thus, MPC is 0.5. The MPS can be calculated by subtracting the MPC from 1 as follows:

MPS=1−MPC=1−0.5=0.5

Thus, the MPS is also equal to 0.5.

(c):

To determine

Equilibrium level of output when the economy employs 40 million workers.

(c):

Expert Solution

Explanation of Solution

The level of unplanned inventory in the economy when employing 40 million workers is $75 billion. Thus, it means that the businesses in the economy would invest more and expand their output in the economy. This leads to an increase in the real GDP and the equilibrium level of real GDP, which is at $475 billion, where the unplanned inventory is $0.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Students have asked these similar questions

Explain how each of the following will affect the consumption and saving schedules (as they relate to GDP) or the investment schedule, other things equal: A large increase in the value of real estate, including private houses A decline in real estate rate A sharp, sustained decline in stock prices. An increase in the rate of population growth. The development of a cheaper method of manufacturing computer chips. A sizable increase in the retirement age for collecting Social Security benefits. An increase in the Federal personal income tax.

Assume the level of autonomous investment is $100 billion and aggregate expendituresequal consumption and investment. Based on the following table, answer the followingquestions. a. Fill in the unplanned inventory column.b. Determine the MPC and MPS.c. If this economy employs a labor force of 40 million, what will happen to this level of employment? Explain and identify the equilibrium level of output.

Which of the following components of consumption spending typically sees the largest decline in demand during a recession? automobiles food clothing housing

Answer 2

Question

Chapter 19, Problem 1SQP

(a):

To determine

Unplanned inventory in the economy.

(a):

Expert Solution

Explanation of Solution

The unplanned inventory investment can be calculated by subtracting the consumption from the real GDP and subtracting the autonomous investment from this value. In the first case, where the level of employment is 40 millions, the consumption is $300, whereas the real GDP is $325. The autonomous investment is $100. Thus, the unplanned inventory can be calculated as follows:

Unplanned inventory=(Real GDP−Consumption)−Autonomous investment=(325−300)−100=25−100=−75

Thus, the unplanned inventory in this case is -75. Similarly, the other case unplanned inventory can be calculated and the table can be completed as follows:

Possible levels of employment (millions of workers)	Real GDP (Output) equals disposable income (billions of dollars)	Consumption (billions of dollars)	Unplanned inventory (billions of dollars)
40	$325	$300	$-75
45	375	325	-50
50	425	350	-25
55	475	375	0
60	525	400	25
65	575	425	50
70	625	450	75

Economics Concept Introduction

Aggregate expenditure: Aggregate expenditure is the measure of the national income. Thus, it is the sum value of the final goods and services produced in the economy, which is measured by the summation of the expenditures made by the factors during the given period of time.

(b):

To determine

Marginal propensity to consume and save.

(b):

Expert Solution

Explanation of Solution

The marginal propensity to consume can be calculated by dividing the change in the consumption by the change in the disposable income. In the first place, when the consumption increases from $300 to $325, the change in the consumption is $25 billion. The real GDP was $325 and it changes to $375, which denotes the change in the disposable income by $50 billion. Thus, MPC can be calculated as follows:

Marginal Propensity to Consume=Change in consumptionChange in disposable income=$25billion$50billion=0.5

Thus, MPC is 0.5. The MPS can be calculated by subtracting the MPC from 1 as follows:

MPS=1−MPC=1−0.5=0.5

Thus, the MPS is also equal to 0.5.

(c):

To determine

Equilibrium level of output when the economy employs 40 million workers.

(c):

Expert Solution

Explanation of Solution

The level of unplanned inventory in the economy when employing 40 million workers is $75 billion. Thus, it means that the businesses in the economy would invest more and expand their output in the economy. This leads to an increase in the real GDP and the equilibrium level of real GDP, which is at $475 billion, where the unplanned inventory is $0.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Question

Chapter 19, Problem 1SQP

(a):

To determine

Unplanned inventory in the economy.

(a):

Expert Solution

Explanation of Solution

The unplanned inventory investment can be calculated by subtracting the consumption from the real GDP and subtracting the autonomous investment from this value. In the first case, where the level of employment is 40 millions, the consumption is $300, whereas the real GDP is $325. The autonomous investment is $100. Thus, the unplanned inventory can be calculated as follows:

Unplanned inventory=(Real GDP−Consumption)−Autonomous investment=(325−300)−100=25−100=−75

Thus, the unplanned inventory in this case is -75. Similarly, the other case unplanned inventory can be calculated and the table can be completed as follows:

Possible levels of employment (millions of workers)	Real GDP (Output) equals disposable income (billions of dollars)	Consumption (billions of dollars)	Unplanned inventory (billions of dollars)
40	$325	$300	$-75
45	375	325	-50
50	425	350	-25
55	475	375	0
60	525	400	25
65	575	425	50
70	625	450	75

Economics Concept Introduction

Aggregate expenditure: Aggregate expenditure is the measure of the national income. Thus, it is the sum value of the final goods and services produced in the economy, which is measured by the summation of the expenditures made by the factors during the given period of time.

(b):

To determine

Marginal propensity to consume and save.

(b):

Expert Solution

Explanation of Solution

The marginal propensity to consume can be calculated by dividing the change in the consumption by the change in the disposable income. In the first place, when the consumption increases from $300 to $325, the change in the consumption is $25 billion. The real GDP was $325 and it changes to $375, which denotes the change in the disposable income by $50 billion. Thus, MPC can be calculated as follows:

Marginal Propensity to Consume=Change in consumptionChange in disposable income=$25billion$50billion=0.5

Thus, MPC is 0.5. The MPS can be calculated by subtracting the MPC from 1 as follows:

MPS=1−MPC=1−0.5=0.5

Thus, the MPS is also equal to 0.5.

(c):

To determine

Equilibrium level of output when the economy employs 40 million workers.

(c):

Expert Solution

Explanation of Solution

The level of unplanned inventory in the economy when employing 40 million workers is $75 billion. Thus, it means that the businesses in the economy would invest more and expand their output in the economy. This leads to an increase in the real GDP and the equilibrium level of real GDP, which is at $475 billion, where the unplanned inventory is $0.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Chapter 19, Problem 1SQP

(a):

To determine

Unplanned inventory in the economy.

(a):

Expert Solution

Explanation of Solution

The unplanned inventory investment can be calculated by subtracting the consumption from the real GDP and subtracting the autonomous investment from this value. In the first case, where the level of employment is 40 millions, the consumption is $300, whereas the real GDP is $325. The autonomous investment is $100. Thus, the unplanned inventory can be calculated as follows:

Unplanned inventory=(Real GDP−Consumption)−Autonomous investment=(325−300)−100=25−100=−75

Thus, the unplanned inventory in this case is -75. Similarly, the other case unplanned inventory can be calculated and the table can be completed as follows:

Possible levels of employment (millions of workers)	Real GDP (Output) equals disposable income (billions of dollars)	Consumption (billions of dollars)	Unplanned inventory (billions of dollars)
40	$325	$300	$-75
45	375	325	-50
50	425	350	-25
55	475	375	0
60	525	400	25
65	575	425	50
70	625	450	75

Economics Concept Introduction

Aggregate expenditure: Aggregate expenditure is the measure of the national income. Thus, it is the sum value of the final goods and services produced in the economy, which is measured by the summation of the expenditures made by the factors during the given period of time.

(b):

To determine

Marginal propensity to consume and save.

(b):

Expert Solution

Explanation of Solution

The marginal propensity to consume can be calculated by dividing the change in the consumption by the change in the disposable income. In the first place, when the consumption increases from $300 to $325, the change in the consumption is $25 billion. The real GDP was $325 and it changes to $375, which denotes the change in the disposable income by $50 billion. Thus, MPC can be calculated as follows:

Marginal Propensity to Consume=Change in consumptionChange in disposable income=$25billion$50billion=0.5

Thus, MPC is 0.5. The MPS can be calculated by subtracting the MPC from 1 as follows:

MPS=1−MPC=1−0.5=0.5

Thus, the MPS is also equal to 0.5.

(c):

To determine

Equilibrium level of output when the economy employs 40 million workers.

(c):

Expert Solution

Explanation of Solution

The level of unplanned inventory in the economy when employing 40 million workers is $75 billion. Thus, it means that the businesses in the economy would invest more and expand their output in the economy. This leads to an increase in the real GDP and the equilibrium level of real GDP, which is at $475 billion, where the unplanned inventory is $0.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 19, Problem 1SQP

(a):

To determine

Unplanned inventory in the economy.

(a):

Expert Solution

Explanation of Solution

The unplanned inventory investment can be calculated by subtracting the consumption from the real GDP and subtracting the autonomous investment from this value. In the first case, where the level of employment is 40 millions, the consumption is $300, whereas the real GDP is $325. The autonomous investment is $100. Thus, the unplanned inventory can be calculated as follows:

Unplanned inventory=(Real GDP−Consumption)−Autonomous investment=(325−300)−100=25−100=−75

Thus, the unplanned inventory in this case is -75. Similarly, the other case unplanned inventory can be calculated and the table can be completed as follows:

Possible levels of employment (millions of workers)	Real GDP (Output) equals disposable income (billions of dollars)	Consumption (billions of dollars)	Unplanned inventory (billions of dollars)
40	$325	$300	$-75
45	375	325	-50
50	425	350	-25
55	475	375	0
60	525	400	25
65	575	425	50
70	625	450	75

Economics Concept Introduction

Aggregate expenditure: Aggregate expenditure is the measure of the national income. Thus, it is the sum value of the final goods and services produced in the economy, which is measured by the summation of the expenditures made by the factors during the given period of time.

(b):

To determine

Marginal propensity to consume and save.

(b):

Expert Solution

Explanation of Solution

The marginal propensity to consume can be calculated by dividing the change in the consumption by the change in the disposable income. In the first place, when the consumption increases from $300 to $325, the change in the consumption is $25 billion. The real GDP was $325 and it changes to $375, which denotes the change in the disposable income by $50 billion. Thus, MPC can be calculated as follows:

Marginal Propensity to Consume=Change in consumptionChange in disposable income=$25billion$50billion=0.5

Thus, MPC is 0.5. The MPS can be calculated by subtracting the MPC from 1 as follows:

MPS=1−MPC=1−0.5=0.5

Thus, the MPS is also equal to 0.5.

(c):

To determine

Equilibrium level of output when the economy employs 40 million workers.

(c):

Expert Solution

Explanation of Solution

The level of unplanned inventory in the economy when employing 40 million workers is $75 billion. Thus, it means that the businesses in the economy would invest more and expand their output in the economy. This leads to an increase in the real GDP and the equilibrium level of real GDP, which is at $475 billion, where the unplanned inventory is $0.

Answer 6

Chapter 19, Problem 1SQP

(a):

To determine

Unplanned inventory in the economy.

(a):

Expert Solution

Explanation of Solution

The unplanned inventory investment can be calculated by subtracting the consumption from the real GDP and subtracting the autonomous investment from this value. In the first case, where the level of employment is 40 millions, the consumption is $300, whereas the real GDP is $325. The autonomous investment is $100. Thus, the unplanned inventory can be calculated as follows:

Unplanned inventory=(Real GDP−Consumption)−Autonomous investment=(325−300)−100=25−100=−75

Thus, the unplanned inventory in this case is -75. Similarly, the other case unplanned inventory can be calculated and the table can be completed as follows:

Possible levels of employment (millions of workers)	Real GDP (Output) equals disposable income (billions of dollars)	Consumption (billions of dollars)	Unplanned inventory (billions of dollars)
40	$325	$300	$-75
45	375	325	-50
50	425	350	-25
55	475	375	0
60	525	400	25
65	575	425	50
70	625	450	75

Economics Concept Introduction

Aggregate expenditure: Aggregate expenditure is the measure of the national income. Thus, it is the sum value of the final goods and services produced in the economy, which is measured by the summation of the expenditures made by the factors during the given period of time.

Answer 7

Chapter 19, Problem 1SQP

(a):

To determine

Unplanned inventory in the economy.

Answer 8

(a):

Expert Solution

Explanation of Solution

The unplanned inventory investment can be calculated by subtracting the consumption from the real GDP and subtracting the autonomous investment from this value. In the first case, where the level of employment is 40 millions, the consumption is $300, whereas the real GDP is $325. The autonomous investment is $100. Thus, the unplanned inventory can be calculated as follows:

Unplanned inventory=(Real GDP−Consumption)−Autonomous investment=(325−300)−100=25−100=−75

Thus, the unplanned inventory in this case is -75. Similarly, the other case unplanned inventory can be calculated and the table can be completed as follows:

Possible levels of employment (millions of workers)	Real GDP (Output) equals disposable income (billions of dollars)	Consumption (billions of dollars)	Unplanned inventory (billions of dollars)
40	$325	$300	$-75
45	375	325	-50
50	425	350	-25
55	475	375	0
60	525	400	25
65	575	425	50
70	625	450	75

Answer 9

(a):

Expert Solution

Answer 10

(a):

Expert Solution

Answer 11

Expert Solution

Answer 12

Economics Concept Introduction

Aggregate expenditure: Aggregate expenditure is the measure of the national income. Thus, it is the sum value of the final goods and services produced in the economy, which is measured by the summation of the expenditures made by the factors during the given period of time.

Answer 13

(b):

To determine

Marginal propensity to consume and save.

(b):

Expert Solution

Explanation of Solution

The marginal propensity to consume can be calculated by dividing the change in the consumption by the change in the disposable income. In the first place, when the consumption increases from $300 to $325, the change in the consumption is $25 billion. The real GDP was $325 and it changes to $375, which denotes the change in the disposable income by $50 billion. Thus, MPC can be calculated as follows:

Marginal Propensity to Consume=Change in consumptionChange in disposable income=$25billion$50billion=0.5

Thus, MPC is 0.5. The MPS can be calculated by subtracting the MPC from 1 as follows:

MPS=1−MPC=1−0.5=0.5

Thus, the MPS is also equal to 0.5.

Answer 14

(b):

To determine

Marginal propensity to consume and save.

Answer 15

(b):

Expert Solution

Explanation of Solution

The marginal propensity to consume can be calculated by dividing the change in the consumption by the change in the disposable income. In the first place, when the consumption increases from $300 to $325, the change in the consumption is $25 billion. The real GDP was $325 and it changes to $375, which denotes the change in the disposable income by $50 billion. Thus, MPC can be calculated as follows:

Marginal Propensity to Consume=Change in consumptionChange in disposable income=$25billion$50billion=0.5

Thus, MPC is 0.5. The MPS can be calculated by subtracting the MPC from 1 as follows:

MPS=1−MPC=1−0.5=0.5

Thus, the MPS is also equal to 0.5.

Answer 16

(b):

Expert Solution

Answer 17

(b):

Expert Solution

Answer 18

Expert Solution

Answer 19

(c):

To determine

Equilibrium level of output when the economy employs 40 million workers.

(c):

Expert Solution

Explanation of Solution

The level of unplanned inventory in the economy when employing 40 million workers is $75 billion. Thus, it means that the businesses in the economy would invest more and expand their output in the economy. This leads to an increase in the real GDP and the equilibrium level of real GDP, which is at $475 billion, where the unplanned inventory is $0.

Answer 20

(c):

To determine

Equilibrium level of output when the economy employs 40 million workers.

Answer 21

(c):

Expert Solution

Explanation of Solution

The level of unplanned inventory in the economy when employing 40 million workers is $75 billion. Thus, it means that the businesses in the economy would invest more and expand their output in the economy. This leads to an increase in the real GDP and the equilibrium level of real GDP, which is at $475 billion, where the unplanned inventory is $0.