Economics:
10th Edition
ISBN: 9781285859460
Author: BOYES, William
Publisher: Cengage Learning
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Question
Chapter 10, Problem 16E
To determine
Derive the aggregate
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Students have asked these similar questions
Why do the aggregate expenditure function and the aggregate demand curve both shift upward at the same time?
Suppose an economy is operating at point A on the graph showing aggregate demand. A decrease in the aggregate price level
causes the economy to move to point B
On the graph showing aggregate expenditures (AE), show the change caused by the movement from point A to point B on the
aggregate demand curve.
Aggregate price level
Aggregate demand
Aggregate output
Aggregate expenditures
Income (Y)
Y-AE
AE
Answer the following questions, which relate to the aggregate expenditures model:a. If Ca is $100, Ig is $50, Xn is -$10, and G is $30, what is the economy’s equilibrium GDP?b. If real GDP in an economy is currently $200, Ca is $100, Ig is $50, Xn is -$10, and G is $30, will the economy’s real GDP rise, fall, or stay the same?c. Suppose that full-employment (and full-capacity) output in an economy is $200. If Ca is $150, Ig is $50, Xn is -$10, and G is $30, what will be the macroeconomic result?
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- What is the aggregate expenditures function?arrow_forwardExplain carefully: “A change in the price level shifts the aggregate expenditures curve but not the aggregate demand curve.”arrow_forwardWhy do economic booms and recessions tend to be transmitted across national borders? Explain your answer based on your understanding of the Aggregate Expenditure model.arrow_forward
- Which of the following is most likely to cause a decrease in the aggregate expenditure (AE) curve? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. A decrease in wealth a b A government stimulus check An increase in unemployment benefits d An increase in education spendingarrow_forwardUsing the table below to answer the following questions. Assume all values represent trillions of dollars. Construct a graph of the Aggregate planned expenditure What is the equilibrium expenditure? Explain what happens at a real GDP of $4 trillion dollars. (Note the aggregate expenditures and the effects on inventories) What are your total autonomous expenditures? What is the marginal propensity to consume? Ignoring imports and income taxes, what is the multiplier? If investment increases by $1.5 trillion, what is the change in real GDP?arrow_forwardIdentify factors that would cause consumption spending to increase. What effect would that have on aggregate demand?arrow_forward
- What are the equations for the consumption, net exports, and aggregate expenditures functions?arrow_forwardQuestion #4 - Use the aggregate expenditures model to demonstrate the multiplier effect.arrow_forwardIn 2009, the US Federal government cut taxes by approximately $300 billion, increased government spending by approximately $300 billion, and increased transfer payments by approximately $200 billion. Answer the following questions, assuming the marginal propensity to consume was 0.75. What was the maximum change in GDP from the government spending? Show your work.arrow_forward
- Explain the concept of the spending multiplier.arrow_forwardEconomists often refer to the “multiplier effect.” What is the “multiplier effect,” and how is its magnitude related to the size of the marginal propensity to consume?arrow_forwardWhat is the multiplier effect during a recession and full employment?arrow_forward
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