MACROECONOMICS FOR TODAY
10th Edition
ISBN: 9781337613057
Author: Tucker
Publisher: CENGAGE L
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Chapter 16.A, Problem 1SQP
(a)
To determine
Economy in equilibrium with recessionary gap in the short-run classical view.
(b)
To determine
Economy in equilibrium with recessionary gap in the long-run classical view.
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Students have asked these similar questions
Consider the graph at right showing an economy in recession. Aggregate demand is currently at AD. Equilibrium
currently occurs at Eo. If aggregate demand was ADF, there would be full employment. Suppose the government
engages in fiscal policy that results in full crowding out.
Using the line drawing tool, draw the new demand curve that shows full crowding out.
Carefully follow the instructions above, and only draw the required object.
Price level
Eo
EF
ADO
F
Real GDP per Year ($ trillions)
SRASO
ADF
O
U
If the economy had been operating at a full- employment equilibrium, a. Describe the macroeconomic equilibrium after the rise in consumer spending. b. Explain and draw a graph to illustrate how the economy can adjust in the long run to restore a full-employment equilibrium. The magazine Women of China reported that Chinese women in big cities spent 63% of their income on consumer goods last year, up from a meager 26% in 2007. Clothing accounted for the biggest chunk of that spending, at nearly 30%, followed by digital products such as cell phones and cameras (11%) and travel (10%). Chinese consumption as a whole grew faster than the overall economy in the first half of the year and is expected to reach 42% of GDP by 2020, up from the current 36%.
the following holds in an economy: YP = $20
Trillion, YActual = $20 Trillion, MPČ = 0.6,
SRAS is perfectly elastic.
a) Use an AD-AS diagram to depict the
economic scenario described.
b) Suppose there is a $0.2 Trillion increase in
autonomous consumption spending. Further
suppose there are no taxes. What would be
the ultimate effect on YActual? Draw a new
diagram to depict this shock and resulting
short-run macroeconomic equilibrium.
c) Again suppose there is a $0.2 Trillion
increase in autonomous consumption
spending (starting from the baseline case you
depicted in part a). Further suppose there are
taxes and the tax rate is 30%. What would be
the ultimate effect on YActual? Draw a new
%3D
diagram to depict this shock and resulting
short-run macroeconomic equilibrium.
d) Use answers to parts b) and c) to comment
on how taxes act as automatic stabilizers in
an economy.
Chapter 16 Solutions
MACROECONOMICS FOR TODAY
Ch. 16.3 - Prob. 1.1YTECh. 16.3 - Prob. 2.1YTECh. 16.3 - Prob. 2.2YTECh. 16.A - Prob. 1SQPCh. 16.A - Prob. 2SQPCh. 16.A - Prob. 3SQPCh. 16.A - Prob. 4SQPCh. 16.A - Prob. 1SQCh. 16.A - Prob. 2SQCh. 16.A - Prob. 3SQ
Ch. 16.A - Prob. 4SQCh. 16.A - Prob. 5SQCh. 16.A - Prob. 6SQCh. 16.A - Prob. 7SQCh. 16.A - Prob. 8SQCh. 16.A - Prob. 9SQCh. 16.A - Prob. 10SQCh. 16.A - Prob. 11SQCh. 16.A - Prob. 12SQCh. 16.A - Prob. 13SQCh. 16.A - Prob. 14SQCh. 16.A - Prob. 15SQCh. 16 - Prob. 1SQPCh. 16 - Prob. 2SQPCh. 16 - Prob. 3SQPCh. 16 - Prob. 4SQPCh. 16 - Prob. 5SQPCh. 16 - Prob. 6SQPCh. 16 - Prob. 7SQPCh. 16 - Prob. 8SQPCh. 16 - Prob. 9SQPCh. 16 - Prob. 10SQPCh. 16 - Prob. 11SQPCh. 16 - Prob. 12SQPCh. 16 - Prob. 1SQCh. 16 - Prob. 2SQCh. 16 - Prob. 3SQCh. 16 - Prob. 4SQCh. 16 - Prob. 5SQCh. 16 - Prob. 6SQCh. 16 - Prob. 7SQCh. 16 - Prob. 8SQCh. 16 - Prob. 9SQCh. 16 - Prob. 10SQCh. 16 - Prob. 11SQCh. 16 - Prob. 12SQCh. 16 - Prob. 13SQCh. 16 - Prob. 14SQCh. 16 - Prob. 15SQCh. 16 - Prob. 16SQCh. 16 - Prob. 17SQCh. 16 - Prob. 18SQCh. 16 - Prob. 19SQCh. 16 - Prob. 20SQ
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