For this question, you should draw the AS/AD diagram on your own paper, and use your diagram tofind the answer. What happens to GDP deflator and real GDP if there is an increase in governmentspending? You may assume the increase in government buying does not cause a decrease in buyingby anyone else.O GDP deflator rises and real GDP falls.O GDP deflator and real GDP both rise.O GDP deflator and real GDP both fall.O GDP deflator falls and real GDP rises.

If there is an increase in government spending and no decrease in spending by anyone else, it would…

Answered: For this question, you should draw the…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Similar questions

A fall in mps raises the GDP multiplier. O True O False
4. What do we mean when we talk about the export base of a region? How does an increase in the export base affect total employment? How does this relate to the multiplier? What factors limit the size of the multiplier within cities?
Course: Macroeconomic - IS-LM Model Prove mathematically the following: Given an increase in the proportional tax on income(t), what happens to the level of output and to the tax?" . Hint: for demostration, use the IS general function for a closed economy Y = C + I + G, where C = a + c*YD and YD = Y + TR - Y*t (where t = proportional income tax) and realize changes i.e., from "t1" to "t2"
Use the initial settings (or any other non-zero value) for the Change in Autonomous Spending and MPC. Click the "Spending Rounds" button at the top of the Settings window. Which of the following describes how the Change in Spending value in each row is related to the Disposable Income value in the same row? O In each row, Change in Spending is Disposable Income minus MPC*(Change in Autonomous Spending). Change in Spending in each row is MPC x Disposable Income for that row. O Change in Spending is always half of Disposable Income. O Change in Spending is Disposable Income times the spending multiplier.
.Refer to the information provided in Figure 8.9 below to answer the questions that follow AE 225 200 175 150 45 100 200 300 Aggregate output ($ millions) Figure 8.9 Refer to Figure 8.9. How will equilibrium aggregate expenditure and equilibrium aggregate output change as a result ?of a decrease in investment by $20 million AE line shifts down, increasing equilibrium output and equilibrium expenditure a O AE line shifts up, increasing equilibrium output and equilibrium expenditure b O AE line shifts down, decreasing equilibrium output and equilibrium expenditure .c O AE line shifts down, increasing equilibrium output and decreasing equilibrium expenditure .d O Aggregate expenditures ($ millions)
8
From the following data, determine the equilibrium level of real GDP.The equilibrium level of real GDP is ______________.
Use the following graph to answer the next question. Price Level 0 AS3 AS₁ AS₂ Real Domestic Output, GDP Which of the following factors will shift AS1 to AS2? O An increase in real interest rates O A decrease in business subsidies O An increase in input prices O A decrease in business taxes.
Which of the following correctly describes how a decrease in the price level affects consumption spending? Select one: a. A decrease in the price level raises real wealth, which causes consumption to increase. b. A decrease in the price level decreases the amount of money a household needs to buy goods and so raises the interest rate, which causes consumption to increase. c. A decrease in the price level increases the amount of money a household needs to buy goods and so raises the interest rate, which causes consumption to increase. d. A decrease in the price level lowers real wealth, which causes consumption to decrease.
30
What could cause the following shift? O Increase in GDP. O Expansionary fiscal policy. O Decrease in future MPK. All of the above. FE IS LM
Suppose the current equilibrium GDP is less than potential GDP. Which of the following actions could the government take to close the output gap? Select one or more: O a. No action is necessary O b. Decrease expenditures C. Decreases taxes Od. Increase taxes O e. Increase expenditures

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