An economy is described by the following equations: cd= 300+ 0.5(YT) - 300r. Desired consumption Desired investment /d = 100 - 100r. Government purchases G = 250. Taxes T = 100. Real money demand L = 0.5Y - 200r. Money supply M = 6,200. Full-employment output = 700.
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- 1. Let us say the estimated equation for the economy's aggregate demand is Y=400 – 15P+ 8G And the estimated equation for the economy's aggregate supply is Y=5+11P-10W where Y is the country's real GDP, P is the price level (GDP deflator), G is government purchases of goods and services, and W is the index of wages. a. If G= 160 and W= 100, find the equilibrium real GDP and the price level in the economy. b. What is the simple multiplier in this economy? Give the number and explain how you figured it out. c. What is the inflation rate due to the government increasing its purchases from G=160 to G= 180 (expansionary fiscal policy), in %? d. What is the value of the multiplier when the price level varies? 2. Imagine an economy in which the slope of the AD curve is equal to the (negative of) slope of the AS curve. If the simple multiplier is equal to 5, what is the value of the multiplier when the price level varies? Give the number and explain how you figured it out.Question 8 Real GDP in the economy is $7,900 Billion and the Marginal Propensity to Consume is 0.56. What will Real GDP in the economy be, in $ Billions, after a $10 Billion increase in Government Spending? (Round your FINAL answer to the nearest whole number/integer.) (BE VERY CAREFUL NOT TO ROUND "MIDDLE" CALCULATIONS. ONLY ROUND THE FINAL ANSWER.) (Do not enter a dollar sign, $. or the word "Billion", just the number.)Consider the graph at right showing an economy in recession. Aggregate demand is currently at AD. Equilibrium currently occurs at Eo. If aggregate demand was ADF, there would be full employment. Suppose the government engages in fiscal policy that results in full crowding out. Using the line drawing tool, draw the new demand curve that shows full crowding out. Carefully follow the instructions above, and only draw the required object. Price level Eo EF ADO F Real GDP per Year ($ trillions) SRASO ADF O U
- An economy’s aggregate demand is specified as follows: C = 300 + 0.8Yd, Investment (Io) = 230, Taxes (T) = 120 + 0.2Y, Government final purchase = 400, Export (X) =240 and Import (M) = 400. Find the equilibrium national income? Find the value of the injections in this economy iii. How much withdrawals are when the economy is in equilibrium?For this problem, you will analyze the following component of GDP: ... O ...consumption [variant 1]... O ...investment [variant 2]... O ...net exports [variant 3]... ...measured in real terms. a) Describe in detail how inflation affects this component of GDP. What is the name of the effect through which this component is affected by inflation? b) The aggregate-demand curve shifted to the left. Suggest two possible events related to this GDP component that could have contributed to this shift. c) Suggest a policy the government can introduce or eliminate to stimulate aggregate demand through this GDP component. d) On the graph below [excluded]: Label the axes. ● Graph the aggregate-demand curve, the long-run aggregate-supply curve, and the short-run aggregate-supply curve. Make sure you label them. Graph the shift of the aggregate-demand curve to the left and label the new curve. Show what will happen if the government introduces the policy you suggested in part (c). Assume the policy…Part B: Aggregate Demand (AD) Curve shows the relationship between the economy’s price level and real GDP demanded. In other words, real GDP demanded by different groups of buyers, i.e., Consumers (C), Businesses (I), Government (G), and Net Amount by Foreigners (Export - Import), at different price levels give us points on a graph, which are connected to form a curve called AD curve. Review the textbook chapter, and conduct internet research to discuss determinants of AD or factors that shift AD curve.
- An economy’s aggregate demand is specified as follows:C = 300 + 0.8Yd, Investment (Io) = 230, Taxes (T) = 120 + 0.2Y, Government final purchase = 400, Export (X) =240 and Import (M) = 400.i. Find the equilibrium national incomeii. Find the value of the injections in this economyiii. How much withdrawals are when the economy is in equilibriumFor example, an increase in the money supply,(NORMINAL, REAL) a variable, will cause the price level, a (NORMINAL, REAL) variable, to increase but will have no long-run effect on the quantity of goods and services the economy can produce, a (REAL, NORMINAL) variable. The notion that an increase in the quantity of money will impact the price level but not the output level is known as (MONETARY, THE QUANITY, PRICE) .Which of the following explain why the Aggregate Demand Curve slopes downward? Mark all that apply. Select 4 correct answer(s) Question 10 options: When the price level rises, the interest rate will rise, reducing Investment Spending. When the price level falls, the interest rate will fall, increasing Investment Spending. When the price level rises, the purchasing power of money declines and Consumption Spending will decline. When the price level falls, the purchasing power of money declines and Consumption Spending will decline. When the domestic price level rises, imports become relatively more expensive and Net Exports increase. When the domestic price level falls, imports become relatively more expensive and exports become less expensive, resulting in an increase in Net Exports.
- Consider an economy described by the following set of equations: c = 120 +0.08Y I = 320 G = 480 X-IM = -80 T = 400 a. Find the actual level of GDP. b. If full employment comes at Y = 1000, would there be a recessionary gap or an inflationary gap? c. What spending changes will be necessary to eliminate this gap? d. What amount of tax changes will be necessary to eliminate this gap? e. What are some policies action that can be taken.Assume an economy operates in the intermediate range of its aggregate supply curve. State the direction of shift for the aggregate demand curve or aggregate supply curve for each of the following changes in conditions. What is the effect on the price level? On real GDP? On employment? a. The price of crude oil rises significantly (300%, say) raising the price of energy generally. b. Spending on national defense doubles. c. Investment spending falls as firms expect slower sales growth. d. An improvement in technology raises labor productivity. e. The United States raises exports of new passenger aircraft to China.3/25/22, 8:59 PM Assignment Print View 8. Assume the economy is currently in equilibrium at its full-employment level of output, the money market is in equilibrium, and the MPC = 0.75. a. Suppose there is an increase in government spending that causes aggregate demand to increase by $16 billion. Show the increase in aggregate demand on the graph. Instructions: Use the tool provided "Aggregate Demand" to plot the new aggregate demand curve. Use the tool provided "New GDP" to plot the new equilibrium. AD and AS Model 200 Tools LRAS 180 AS 160 Aggregate Dei New GDP 140 120 100 80 60 AD 40 20 16 32 48 64 80 96 112 128 144 160 Real GDP (billions of dollars) Now suppose the Federal Reserve wants to keep inflation from hurting the economy and maintain output at the full-employment level. https://ezto.mheducation.com/hm.tpx?todo=c15SinglePrintView&singleQuestionNo=8.&postSubmissionView=13252718377637707&wid=13252718466136846&rol... 1/3 Price Level