Changes in the autonomous expenditure .

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Chapter 23, Problem 23.4.6PA

To determine

Changes in the autonomous expenditure.

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5:06 A & & & P M Page 4 of 5 QUESTION 4 The figure below shows the planned Aggregate Expenditure function for a hypothetical economy (AEp = 1,000 + 0.5 * Y). In this economy, taxes and transfers are equal to zero, so YD =Y. What is the value of unplanned investment expenditure (Iµ) when GDP = 3,000? Suppose that, next period, autonomous consumption increased by 100 and every thing else remained the same. Under these new circumstances, what would the value of unplanned investment be when GDP = 3,000? 5,000 4, 500 4, 000 3, 500 3,000 AEp = 1,000 + 0.5*Y 2, 500 2000 1, 500 1,a00 500 500 1,000 1, 500 2,000 2 500 3,000 3,500 4,000 4,500 5,000 REAL GDP Page 5 of 5 QUESTION A5 a. Suppose that some kind of significant economic event has occurred, and you learn that the event will de finitely cause the aggregate price level to decrease, but that its effect on short-run equilibrium real GDP cannot be determined without knowing the exact PLANNED AGGREGATE EXPENDITURE

Question 45 5 pts Potential GDP equals $500 billion. The economy is currently producing GDP equal to $400 billion. If the MPC is 0.52, then autonomous spending must change by $ billion for the economy to move to potential GDP? Please round to two decimal places where needed. Question 46 5 pts Suppose Ford plans to produce 9.2 million trucks this year. The company expects to sell 7.5 million. Suppose that at the end of the year, Ford has sold 7.3 million trucks. What is the level of planned inventories? Please round to the nearest one-decimal and enter as millions. For example, if your answer was 4,500,000 you would enter the number 4.5. Question 47 5 pts An economy sees consumption increase by $2,792 million when disposable income increases by $4,770. Assuming the marginal propensity to consume remains constant, what is the marginal propensity to save? Please round to the closest two decimal places.

The following are exogenous (not directly affected by income): G = 9 I = 14 X = M = 0 The consumption function is: C = k + cY, where k = 8, c = 0.6 What is the equilibrium level of GDP? State to ONE decimal place What is the multiplier for this economy? The following are exogenous (not directly affected by income): G = 11 I = 4 X = M = 0 The consumption function is: C = k + cY, where k = 3, c = 0.8 What is the equilibrium level of GDP? What is the multiplier? Same information as in the previous question: The following are exogenous (not directly affected by income): G = 11 I = 4 X = M = 0 The consumption function is: C = k + cY, where k = 3, c = 0.8 Imagine the maximum potential output or real GDP of this economy is 100. Assume that is the same as saying we reach the edge of the PPF at 100. Now assume we want to get that economy from the current level of GDP to its maximum potential of 100. We can do this in two ways - either increase government spending (G) or reduce taxes, (we…