Macroeconomics, Student Value Edition Plus MyLab Economics with Pearson eText -- Access Card Package (12th Edition)
12th Edition
ISBN: 9780134004976
Author: Michael Parkin
Publisher: PEARSON
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Question
Chapter 11, Problem 12SPA
(a)
To determine
Identify the change in the real GDP in the long run.
(b)
To determine
Identify the price level changes in the long run.
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For each of the following, please explain each step and show it in the graph!
a. Assume an economy is at full employment, but then consumer spending rises. What will most likely happen in the short run?
Question
1. Explain why the Aggregate Demand curve is downward sloping .
2. Explain why the Aggregate Supply curve is upward sloping .
3. What determines potential output Yf, and how can the economy exceed Yf in the short run?
4. Explain the Equilibrium condition of Aggregate Expenditure= output Y. How are inventory changes related to AE and Y?
5. Define the multiplier and the marginal propensities to consume (MPC) and save (MPS). What is the relationship between the MPC and the multiplier?
6. Compare and contrast the short run Keynesian and long run Neoclassical views of the aggregate supply and Phillips curves
7. For each the following economies, calculate equilibrium Y*, the multiplier, and the size of the recessionary or inflationary gap, if any.
a. AE= 250 +.75 Y
Yf= 1200
b. AE= 400+ .9 Y
Yf= 3000
c. AE= 300 +. 8Y
Yf=1500
d. AE= 300+ .67 Y
Yf=1000
Which of the following will increase the slope of the demand curve in the goods market to indicate an increase in the level of output and income?
Select one:
a. An increase in autonomous investment.
b. An increase in the marginal propensity to consume.
c. An increase in government spending.
d. An increase in taxation.
Chapter 11 Solutions
Macroeconomics, Student Value Edition Plus MyLab Economics with Pearson eText -- Access Card Package (12th Edition)
Ch. 11.1 - Prob. 1RQCh. 11.1 - Prob. 2RQCh. 11.1 - Prob. 3RQCh. 11.2 - Prob. 1RQCh. 11.2 - Prob. 2RQCh. 11.2 - Prob. 3RQCh. 11.2 - Prob. 4RQCh. 11.3 - Prob. 1RQCh. 11.3 - Prob. 2RQCh. 11.3 - Prob. 3RQ
Ch. 11.4 - Prob. 1RQCh. 11.4 - Prob. 2RQCh. 11.4 - Prob. 3RQCh. 11.4 - Prob. 4RQCh. 11 - Prob. 1SPACh. 11 - Prob. 2SPACh. 11 - Prob. 3SPACh. 11 - Prob. 4SPACh. 11 - Prob. 5SPACh. 11 - Prob. 6SPACh. 11 - Prob. 7SPACh. 11 - Prob. 8SPACh. 11 - Prob. 9SPACh. 11 - Prob. 10SPACh. 11 - Prob. 11SPACh. 11 - Prob. 12SPACh. 11 - Prob. 13SPACh. 11 - Prob. 14SPACh. 11 - Prob. 15APACh. 11 - Prob. 16APACh. 11 - Prob. 17APACh. 11 - Prob. 18APACh. 11 - Prob. 19APACh. 11 - Prob. 20APACh. 11 - Prob. 21APACh. 11 - Prob. 22APACh. 11 - Prob. 23APACh. 11 - Prob. 24APACh. 11 - Prob. 25APACh. 11 - Prob. 26APACh. 11 - Prob. 27APACh. 11 - Prob. 28APACh. 11 - Prob. 29APACh. 11 - Prob. 30APACh. 11 - Prob. 31APACh. 11 - Prob. 32APACh. 11 - Prob. 33APACh. 11 - Prob. 34APA
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Similar questions
- Which statement is false? Select one: a. If consumers and businesses both increase spending, everyone's incomes falls. b. Consumer spending is business income. c. Falling wages decrease demand in output markets. d. Business spending is consumer income. e. If consumers and businesses both increase spending, employment increases.arrow_forwardWhich of the following is true of the change in the quantity of aggregate output demanded? a.The change in the quantity of aggregate output demanded depends only on how much the aggregate expenditure line shifts. b.The change in the quantity of aggregate output demanded depends only on the change in investment demand. c.The change in the quantity of aggregate output demanded depends only on the change in government spending. d.The change in the quantity of aggregate output demanded depends only on the change in interest rates.arrow_forward2. How does each of the following affect the aggregate demand curve? a. Government spending increases. b. The amount of taxes collected decreases.arrow_forward
- 3. When the following event occurs, the change in Real GDP = Event: The government increases its education funding by $60 billion; the marginal propensity to consume is 0.6. the multiplier.arrow_forward3. Political turbulences and the pandemic affected Hong-Kong's consumer confidence significantly in 2020. Now, that the pandemic is under control in Hong Kong, marginal propensity to consume has increased from 0.5 to 0.7. a. Use the consumption model to assess the effects of an increase in marginal propensity to consume (MPC) on overall consumption. Use the model (math) and the graphs. Explain. b. How it will affect overall aggregate demand and income?arrow_forwardPlease answer fast please arjent help please answer.arrow_forward
- Study the graph below. When will the multiplier be biggest? Price Level AD1 AS AD3 AD2 GDP Select one: a. When aggregate demand is at AD3 b. When aggregate demand is at AD2 c. When aggregate demand is at AD1 d. The multiplier will be the same size no matter what Aggregate Demand is ○ e. The multiplier will be one no matter what aggregate demand isarrow_forwardConsider the graph below: Planned Aggregate Expenditure (PAE, billions of $) 1000 900 800 700 600 500 400 300 200 100 0 100 200 300 400 500 600 700 800 1 PAE 2 PAE Y PAE₁ 900 1000 Actual Aggregate Expenditure (Output or GDP, billions of $) a. What is the expenditure multiplier in this economy? b. What is the marginal propensity to consume in this economy?arrow_forward1. How is the aggregate demand curve different from the demand curve for a single good, like hamburgers?arrow_forward
- Describe the multiplier effect and its effects on the economy of a tourism destination. Use your own words and povide at least two examples.arrow_forward1. What is meant by "autonomous consumption"? 2. Explain the consumption puzzle?arrow_forwardWhich 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.arrow_forward
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