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 11.4, Problem 4RQ
To determine
Explain the effect of an increase in autonomous expenditure on the real GDP changes in long run, and explain whether the real GDP changes by the same amount of change in aggregate demand.
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Consider an economy that uses exclusively labor and capital to produce.Suddenly, the government of the economy plans to permanently increase the level ofgovernment purchases. Please use words and figures to illustrate your answers.(1) Suppose the economy is a closed one. How does the long-run GDP of the economychange because of the increased government purchases?
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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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- the question is true or false: "An increase in business investment spending has the same effect on the level of ad as an increase in the same amount of government spending" can you explain what the answer is? Would they equal each other out?arrow_forwardFor the following economy, find autonomous expenditure, the multiplier, short-run equilibrium output, and the output gap. By how much would autonomous expenditure have to change to eliminate the output gap? C = 2,500 + 0.75 (Y – T ) I p = 1,500 G = 2,000 NX = 300 T = 1,500 Y* = 19,900 Instructions: Enter your responses as whole numbers. Autonomous expenditure: 5175Multiplier: 4Short-run equilibrium output: 20,700Output gap: (DO THIS PART)Autonomous expenditure would need to (Click to select) decrease increase by ____________to eliminate the output gap. (DO THIS PARTarrow_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_forward
- will an increase in productivity affect the aggregate supply curve and the aggregate demand curve?arrow_forwardFor the following economy, find autonomous expenditure, the multiplier, short-run equilibrium output, and the output gap. By how much would autonomous expenditure have to change to eliminate the output gap? C = 550 + 0.75 (Y – T ) I p = 200 G = 200 NX = 60 T = 180 Y* = 3,400 Instructions: Enter your responses as absolute numbers. Autonomous expenditure: 875Multiplier: 4Short-run equilibrium output: 3500 There is (Click to select) an expansionary output gap in the amount of 100.(DO THIS PART) Autonomous expenditure would need to decrease by________ to eliminate the output gap.arrow_forwardWhy can’t an economy with a MPC greater than one reach a stable equilibrium in the aggregate expenditure model?arrow_forward
- The following are exogenous (not directly affected by income): G = 11 I = 4 X = M = 0 The consumption function is: C = k + cY, where k = 3, c = 0.8 What is the equilibrium level of GDP? What is the multiplier?arrow_forwardThe total expenditure in Macroland begins with these initial levels (in trillions of dollars): autonomous consumption=1, Investment = 2; Net Exports = 0, T=2, and MPC = 0.75. Assume that equilibrium has been achieved. Suddenly there is an external shock and as a result investment goes down to 1. What is the change in GDP? Use the base model to answer this question. Equilibrium GDP goes down by 1 Equilibrium GDP goes up by 1 Equilibrium GDP goes up by 4 Equilibrium GDP goes down by 4arrow_forwardWhat is exogenous (autonomous) expenditure and what is the value of the multiplier? Calculate equilibrium output for this economy. Show how you obtained your figure.arrow_forward
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