Macroeconomics
13th Edition
ISBN: 9781337617390
Author: Roger A. Arnold
Publisher: Cengage Learning
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Question
Chapter 10, Problem 4WNG
(a)
To determine
According to Keynes, why the aggregate
(b)
To determine
Decrease in consumption is not matched by increase in investment.
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Please write down whether the following statements are true or false, and explain your answer very briefly
A)If actual investment is greater than planned investment, inventories increase more than planned.
B)The marginal propensity to consume is the change in consumption expenditure divided by the percentage change in income.
C)Gross domestic product (GDP) is the value of all goods and services produced in an economy over a particular time period.
D)Monetary policy refers to taxation and spending policies implemented by government.
E)In a simple Keynesian model (with lump-sum taxes and a MPC of 0.8), a tax cut of 20 billion TL will have less of an impact on GDP than an increase in government spending of 10 billion TL.
D)When you take 1000 TL from your savings account and deposit it in your checking account, M2 decreases.
F)An open market purchase of government securities (such as Treasury Bills) by the Central Bank will decrease the money supply and raise the interest rate.…
7. Deriving and exploring the total expenditures curve
The following graph shows total production (TP) and the level of Natural Real GDP (NRGDP) for a hypothetical economy. When Real GDP is $325
billion, consumption is $275 billion, government purchases are $50 billion, and investment is $25 billion. When Real GDP is $375 billion, consumption
is $300 billion, government purchases are $50 billion, and investment is $25 billion.
Use the blue line (circle symbol) to plot the economy's total expenditure function within a simplified Keynesian framework.
450
425
X
400
375
TOTAL EXPENDITURE (Billions of dollars)
500
475
350
325
300
300
TP
NRGDP
325
350 375 400
425
REAL GDP (Billions of dollars)
450
475
500
TE
?
10
. In the “complete Keynesian model”, the investment functions was I = I0 - f(i). An analyst now proposes the following investment function: I = I0 - f(i) + qY, where “q” is a parameter and Y is national income = GDP. Provide two different arguments, i.e. explanations as to why this investment function makes sense. The focus is on the new term, qY (q times Y), in the function.
Chapter 10 Solutions
Macroeconomics
Ch. 10.1 - Prob. 1STCh. 10.1 - Prob. 2STCh. 10.1 - Prob. 3STCh. 10.2 - Prob. 1STCh. 10.2 - Prob. 2STCh. 10.2 - Prob. 3STCh. 10.3 - Prob. 1STCh. 10.3 - Prob. 2STCh. 10.3 - Prob. 3STCh. 10.4 - Prob. 1ST
Ch. 10.4 - Prob. 2STCh. 10 - Prob. 1QPCh. 10 - Prob. 2QPCh. 10 - Prob. 3QPCh. 10 - Prob. 4QPCh. 10 - Prob. 5QPCh. 10 - Prob. 6QPCh. 10 - Prob. 7QPCh. 10 - Prob. 8QPCh. 10 - Prob. 9QPCh. 10 - Prob. 10QPCh. 10 - Prob. 11QPCh. 10 - Prob. 12QPCh. 10 - Prob. 13QPCh. 10 - Prob. 14QPCh. 10 - Prob. 15QPCh. 10 - Prob. 16QPCh. 10 - Prob. 17QPCh. 10 - Prob. 18QPCh. 10 - Prob. 19QPCh. 10 - Prob. 20QPCh. 10 - Explain how to derive a total expenditures (TE)...Ch. 10 - Prob. 22QPCh. 10 - Prob. 23QPCh. 10 - Prob. 24QPCh. 10 - Prob. 25QPCh. 10 - Prob. 1WNGCh. 10 - Prob. 2WNGCh. 10 - Prob. 3WNGCh. 10 - Prob. 4WNGCh. 10 - Prob. 5WNGCh. 10 - Prob. 6WNGCh. 10 - Prob. 7WNGCh. 10 - Prob. 8WNG
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- Q.1.7 In the Keynesian macroeconomic model, the equation for the savings function is given as: S = -420 + 1/4Y. Based on this information, which of the following statements is correct? (1) The marginal propensity to consume is 1/4; (2) The marginal propensity to save is -420;arrow_forwardAccording to Keynes(Keynesian Macroeconomics), can the private sector always remove the economy from a recessionary gap? What would be the solution from a Christian perspective regarding people who cannot afford medical care?arrow_forwardThe consumption and saving functions in the Keynesian model Suppose we observe that a person's disposable income (DI) is 50,000 in 2019 and 63,000 in 2020. Suppose we observe that this person's consumption (C) is 47,000 in 2019 and 58,700 in 2020. Assume that this person's consumption obeys the Keynesian consumption function, so that C = A + MPC*DI. Finally, assume that A and MPC are unchanged between 2019 and 2020. (a) Calculate the values of A and MPC for this consumer, and graph the consumption function. (Hint: subtract the C function in 2019 from the C function of 2020). (b) In general, saving is given by the formula S = DI - C. Calculate this person's saving in 2019 and 2020. Assuming that this person's wealth (net worth) on January 1, 2019 was 80,000, what is their wealth on January 1, 2020? on January 1, 2021? (c) In general, if consumption is given by the function C = A + MPC*DI, then saving will obey the saving function S = -A + (1 - MPC)*DI. Plot the saving function…arrow_forward
- Identify the direction of the change during a recession in each of the following: consumption expenditures, investment expenditures, and unemployment.arrow_forwardKeynes recommended that high unemployment should be remedied with a reduction in the money supply an increase in government expenditures an increase in taxes an increase in aggregate supplyarrow_forwardWhat are the various factors which influence propensity to consumearrow_forward
- The policies of the federal government influence the outcomes of the various activities in that economy. When government policies change or unplanned events occur, the resulting economic events or activity will usually change. Listed below is a policy or event that affect the performance of the economy: The level of investment decreases because of a lack of confidence in the economy. for the question above, describe what would be the likely outcome in the economy. Use the appropriate tools of analysis, such as aggregate demand and aggregate supply where appropriate, to justify and explain your answer.arrow_forwardUsing a macroeconomics demand/supply analysis, where do you think current output is relative to what the economy is capable of producing? Look at recent trends in the data. What are the recent trends in the components of aggregate demand (consumption spending, investment spending, government purchases, and exports and imports?arrow_forwardConsider a closed economy to which the Keynesian-cross analysis applies. Consumption is given by the equation C = 200 + 2/3(Y – T). Planned investment is 300, as are government spending and taxes. What happens to unplanned inventory investment? Should equilibrium Y be higher or lower than 1,500?arrow_forward
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