Investment spending rises by $200. Make a table showing the effect on I, C, and
for format.
Draw an AD/AS diagram showing the effect of the above on real GDP if we are far to the left of QN so the SRAS curve is flat. Be sure to include the numbers from the table on your diagram in their correct places. Start with AD0 and Q0, then show the effect of rounds 1 and 2 with AD1, Q1, AD2, and Q2. After you have done the first 2 rounds, skip ahead to showing the final AD curve and the final Q (ADF and QF). Remember to include the numerical distance covered from Q0 to QF on your diagram. I did this in video 2, so review that help you with this. Think carefully on whether the AD curve is shifting to the right or to the left. Remember, shifts to the right are increases and to the left are decreases.
Trending nowThis is a popular solution!
Step by stepSolved in 1 steps with 3 images
- refer to figure 23.6. if aggregate income is $1,000, aggregate consumption is Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.arrow_forwardNow assume you are examining a new economy. You learn that the mpc of this new economy is 0.75 and that the government wants to increase the level of output by $3000. What change in G achieves this desired change in Y? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a $750 b $1500 $3000 d $12000arrow_forwardIf aggregate expenditure is greater than real GDP, we could expect which of the following toarrow_forward
- Q5 Homework • Unanswered Assume an economy can be modeled with these equations: C = 280 + 0.75 Yd, I = 200, G = 102 - 0.052 Y, X = 300 M = 365 and T = -40 + 0.22Y. What is the new value of Y when Investment rises by 5? 2 decimals please. Type your numeric answer and submit Unanswered Submit Q6 Homework • Unanswered Assume an economy can be modeled with these equations: C = 220 + b Yd, I = 200, G = 102 - 0.045 Y, X = 300 M = 325 and T= -40 + 0.29Y. What is the value of b when the multiplier on Investment is 1.925? 2 decimals please. Type your numeric answer and submitarrow_forwardAggregate Income, Aggregate Consumption, Aggregate Saving, The value of the MPC is (Round your response to one decimal place.) Y C S $0 $200 $-200 100 250 -150 200 300 -100 300 350 -50 400 400 0 500 450 50 600 500 100arrow_forwardgive answer woith explaantionarrow_forward
- Question Can this be explained in a simple way? Thanks The following table illustrates a few rounds of the multiplier process for a 2 sector economy for an initial increase in exogenous planned investment of 50. delta PAE 50 35 24.5 17.15 delta y 50 35 24.5 17.15 What is the approximate value of the multiplier in this economy? 1.4 2.4 3.0 3.3 0.7 The first round effect on GDP comes for the increase in exogenous investment, but the subsequent rounds depend on the amount of the additional GDP/national income that is spent. This depends on the marginal propensity to consume. In round 2 we have 35 = c times 50. So c =0.7 and the multiplier is l/(l-0.7) = 3.3333 or approximately 3.3.arrow_forwardWe again assume asimple closed economy with GDP of 100 and:c0(autonomous consumption) = 20c1 (marginal propensity to consume) = 0.6I (investment) = 20.a) Now assume that c0falls by 5 (i.e. 5% of GDP), i.e. for any given level of output,consumption will fall by 5. Show the implied fall in the AD function in yourdiagram and show that output will fall by more than 5.b) Show that the multiplier is equal to 2.5, and hence that, in the new equilibrium,output will have fallen by 12.5 (i.e. by 12.5%)c) How big would the impact be if, say, c1 = 0.4 or c1 = 0.8? Explain the difference.arrow_forwardIs the relationship between changes in spending and changes in real GDP in the multiplier effect a direction (positive) relationship or is it an inverse (negative) relation- ship?arrow_forward
- 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.arrow_forwardFill in the aggregate saving column in the following table. (Include a minus sign if necessary.) Aggregate Income, Y $0 100 200 300 400 500 600 Aggregate Consumption, C $200 250 300 350 400 450 500 The value of the MPC is one decimal place.) T Aggregate Saving, S $-200 150 100 50 0 50 100 (Round your response to CXIE DE Aggregate consumption, C Aggregate saving, S 700- 600- 500- 400 300- 200 100- 0 -100- -200- 300- -400- 100 200 300 400 500 Aggregate income, Y 600arrow_forwardAnswer the following questions: Instructions: Enter your answers rounded to the nearest whole number. a. By how much will GDP change if firms increase their investment by $12 billion and the MPC is 0.80? billion b. If the MPC is 0.50? %24 billionarrow_forward
- Principles of Economics (12th Edition)EconomicsISBN:9780134078779Author:Karl E. Case, Ray C. Fair, Sharon E. OsterPublisher:PEARSONEngineering Economy (17th Edition)EconomicsISBN:9780134870069Author:William G. Sullivan, Elin M. Wicks, C. Patrick KoellingPublisher:PEARSON
- Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage LearningManagerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage LearningManagerial Economics & Business Strategy (Mcgraw-...EconomicsISBN:9781259290619Author:Michael Baye, Jeff PrincePublisher:McGraw-Hill Education