140 AD /0 AD2 130 Price index 120 110 100 90 96 80 80 200 240 280 320 360 400 440 480 520 560 Real GDP

Macroeconomics: Assuming marginal propensity to consume is 0.5. If there is a shock to the economy that increases investment spending by 200 billion dollars what will the total Change to GDP be? (Ignore taxes and imports)

SRAS PL2 PL AD2 AD REAL GDP The Aggregate Demand Model shows an increase in Aggregate Demand or an increase in GDP. Which Fiscal Policy Action would cause this change O Raise Taxes & Cut Government Spending O Decrease Taxes & Government Spending O Increase Taxes & Government Spending O Cut Taxes and Increase Government Spending PRICE LEVEL

the question is true or false: "An increase in business investment spending has the same effect on the level of ad as an increase in the same amount of government spending" can you explain what the answer is? Would they equal each other out?

TOPIC: Crowding Out.

US President Collin Hawkins is concerned about the economy. He orders the Treasury to issue direct stimulus payments to citizens in an effort to prevent a recession. On average citizens save 20% of their income. The total of this stimulus amount is $1.3 trillion USD. What is the multiplier? What is the total economic impact of this injection? $ "instead of using 'O's, simply note the number using "m", "b", or "t" for 'million, "billion, or 'trillion. For example if your answer is "$56,100,000,000", you should instead type "$56.1b"

Suppose an economy had aggregate demand components with the following relationships:  Consumption spending, C=140+.60*(DY) Investment spending,I=25+.15*Y Government Spending, G= 0  Net Export Spending,X=0  Tax collections, Tx=0    a. What is the equilibrium income for this economy?  b. If the government decided to increase G spending by 6, what would be the new equilibrium income for this economy?  c. If instead the government decided to reduce Tx (taxes) by 10, what would be the new equilibrium income for the economy?  d. If instead the government decided to increase G spending and Increase Tx (taxes) by 20, what would be the new equilibrium for this economy?

When households cut back on their spending, then in the short run we tend to see the price level ______ and equilibrium output __________. fall; fall rise; fall rise; rise fall; rise

QUESTION 3 Give a hypothetical numerical example to show the relationship between the marginal propensity to consume (MPC) and the multiplier (m)? a. b. Considering both the simple Keynesian and the aggregate demand-supply frameworks, if households as a group experience a decrease in wealth at a given price level, what happen to Total Expenditure (TE), Aggreggate Demand (AD) and Real GDP. Illustrate and explain the change using a suitable graph.