A. The accompanying table shows gross domestic income product (GDP), disposable income (YD), consumer spending (C), and planned investment spending (I manned) in an economy. Assume there is no government or foreign sector in this economy. Complete the table by calculating planned aggregate spending (AEpoet) and unplanned inventory investment (I unplanned). (10 points)(show work and ANSWER ALL PARTS) GDP YO C Iplanned AE planned I Unplanned (billions of dollars) $0 $0 $100 $300 400 400 400 300 800 800 700 300 1,200 1,200 1,000 300 1,600 1,600 1,300 300 2,000 2,000 1,600 300 2,400 2,400 1,900 300 2,800 2,800 2,200 300 3,200 3,200 2,500 300 B. What is the aggregate consumption function? (10 points) C. What is Y*, income-expenditure equilibrium GDP? Explain why. (10 points) D. What is the value of the multiplier? (5 points) E. If planned investment spending falls to $200 billion, what will be the new Y*? (10 points) F. If autonomous consumer spending rises to $200 billion, what will be the new Y* 7(10 points Note: Show all of your work including calculations. Unit 11: The Effect of a Change in Spending on GDP Assuming that the aggregate price level is constant, the interest rate is fixed, and there are no taxes and no foreign trade, what will be the change in GDP if the following events occur? A. There is an autonomous increase in consumer spending of $25 billion; the marginal propensity to consume is 2/3. (5 points) B. Firms reduce investment spending by $40 billion; the marginal propensity to con- sume is 0.8. (5 points) C. The government increases its purchases of military equipment by $60 billion; the marginal propensity to consume is 0.6. (5 points)
A. The accompanying table shows gross domestic income product (GDP), disposable income (YD), consumer spending (C), and planned investment spending (I manned) in an economy. Assume there is no government or foreign sector in this economy. Complete the table by calculating planned aggregate spending (AEpoet) and unplanned inventory investment (I unplanned). (10 points)(show work and ANSWER ALL PARTS) GDP YO C Iplanned AE planned I Unplanned (billions of dollars) $0 $0 $100 $300 400 400 400 300 800 800 700 300 1,200 1,200 1,000 300 1,600 1,600 1,300 300 2,000 2,000 1,600 300 2,400 2,400 1,900 300 2,800 2,800 2,200 300 3,200 3,200 2,500 300 B. What is the aggregate consumption function? (10 points) C. What is Y*, income-expenditure equilibrium GDP? Explain why. (10 points) D. What is the value of the multiplier? (5 points) E. If planned investment spending falls to $200 billion, what will be the new Y*? (10 points) F. If autonomous consumer spending rises to $200 billion, what will be the new Y* 7(10 points Note: Show all of your work including calculations. Unit 11: The Effect of a Change in Spending on GDP Assuming that the aggregate price level is constant, the interest rate is fixed, and there are no taxes and no foreign trade, what will be the change in GDP if the following events occur? A. There is an autonomous increase in consumer spending of $25 billion; the marginal propensity to consume is 2/3. (5 points) B. Firms reduce investment spending by $40 billion; the marginal propensity to con- sume is 0.8. (5 points) C. The government increases its purchases of military equipment by $60 billion; the marginal propensity to consume is 0.6. (5 points)
Chapter5: Gross Domestic Product
Section: Chapter Questions
Problem 9SQ
Related questions
Question
Transcribed Image Text:A. The accompanying table shows gross domestic income product (GDP),
disposable income (YD), consumer spending (C), and planned investment
spending (I manned) in an economy. Assume there is no government or foreign
sector in this economy. Complete the table by calculating planned aggregate
spending (AEpoet) and unplanned inventory investment (I unplanned). (10
points)(show work and ANSWER ALL PARTS)
GDP
YO
C
Iplanned
AE planned
I Unplanned
(billions of dollars)
$0
$0
$100
$300
400
400
400
300
800
800
700
300
1,200
1,200
1,000
300
1,600
1,600
1,300
300
2,000
2,000
1,600
300
2,400
2,400
1,900
300
2,800 2,800
2,200
300
3,200
3,200
2,500
300
B. What is the aggregate consumption function? (10 points)
C. What is Y*, income-expenditure equilibrium GDP? Explain why. (10 points)
D. What is the value of the multiplier? (5 points)
E. If planned investment spending falls to $200 billion, what will be the new Y*? (10
points)
F. If autonomous consumer spending rises to $200 billion, what will be the new Y*
7(10 points Note: Show all of your work including calculations.
Unit 11: The Effect of a Change in Spending on GDP
Assuming that the aggregate price level is constant, the interest rate is fixed, and there
are no taxes and no foreign trade, what will be the change in GDP if the following
events occur?
A. There is an autonomous increase in consumer spending of $25 billion; the
marginal propensity to consume is 2/3. (5 points)
B. Firms reduce investment spending by $40 billion; the marginal propensity to con-
sume is 0.8. (5 points)
C. The government increases its purchases of military equipment by $60 billion; the
marginal propensity to consume is 0.6. (5 points)
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