Economics:
10th Edition
ISBN: 9781285859460
Author: BOYES, William
Publisher: Cengage Learning
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Question
Chapter 11, Problem 16E
To determine
To compute:
The value for equilibrium level of real
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Use the following equations for question 16.C = $400 +0.8Y I = $300 G = $200X = $300 -0.4Y
16. What is the equilibrium level of real GDP?
From the information below calculate aggregate demand;
Consumption (C) = $200 + 0.6Y
Investment (I) = $300
Government (G) = $100
Net Export (NX) = $50
Which one of the following statements about Consumption and Aggregate Demand is CORRECT when the economy achieves equilibrium GDP?
a.
One is 350 greater than the other
b.
One comprises the other
c.
They are valued at $1025 and $1375, respectively
d.
They are valued at $1375 and $1025, respectively
e.
They are both the same
Given the information below, answer the questions that follow.
C = $40 + 0.8Y I = $30 G = $40 X – M = -$10
a) What is the equilibrium GDP? Explain why $550 is not the equilibrium.
b) What is the marginal propensity to consume (MPC) in this question? (Explain)
c) What is the multiplier in this question and explain the significance of the multiplier? (Show all work)
d) Assuming that the full employment level of output is $600, what kind of gap exists and how large is it? Explain
e) If transfer payments increased by $10 and the price level did not change, what would the new equilibrium be? (Show all work)
f) How would your answer to part (e) change if the price level did change?
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