Economics (7th Edition) (What's New in Economics)
7th Edition
ISBN: 9780134738321
Author: R. Glenn Hubbard, Anthony Patrick O'Brien
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 23, Problem 23.4.14PA
Subpart (a):
To determine
The value of equilibrium GDP.
Subpart (b):
To determine
The value of MPC.
Subpart (c):
To determine
The value of multiplier.
Subpart (d):
To determine
The value of real GDP.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Use the diagram to the right to answer the following:
a. The equilibrium value of real GDP is $ trillion. (Enter your response as a whole number.)
b. The MPC is equal to
(Enter your response rounded to two decimal places.)
c. The multiplier is equal to
(Enter your response rounded to one decimal place.)
d. What is the value of unplanned changes in inventories when real GDP has each of the
following values? (Enter your responses rounded to one decimal place and include a minus sign if
necessary.)
GDP
$10 trillion
$12 trillion
$14 trillion
Unplanned Inventories
trillion
trillion
trillion
C
Aggregate Expenditure, AE ($, trillions)
24.0-
22.0
≈ ≈ ¦ CO
20.0-
18.0-
16.0-
14.0-
12.0+
10.0-
8.0-
6.0-
4.0-
2.0-
0.0-
O.
13.6
12.0
10.4
0
45°
-~
2 4
AE
10:12:14
10 12 14 16 18 20 22 24
6
8
Real GDP, Y ($, trillions)
G
What are the four categories of aggregate expenditure (demand)? Give an example of each.
9.1 Calculate the Marginal Propensity to Consume and the Marginal Propensity to Save. Fill in the blanks in the following table. Show that the MPC plus the MPS equals 1.
National Income & Real GDP (Y)
Consumption (C)
Saving (S)
MPC
MPS
$9,000
$8,000
$10,000
$8,600
$11,000
$9,200
$12,000
$9,800
$13,000
$10,400
Q3.
Real GDP
Consumption
Planned Investment
Government Purchases
Net Exports
$5,000
$4,500
$500
$325
-125
6,000
5,300
$500
$325
-125
7,000
6,100
$500
$325
-125
8,000
6,900
$500
$325
-125
Answer the questions based on the table below. The values are in millions of dollars.
What is the equilibrium level of real GDP?
What is the MPC?
If potential GDP is $7,000 million, is the economy at full employment? If not, what is the condition of the economy?
If the economy is not at full employment, by how much should government spending increase so that the economy can move to the full employment level of GDP?
Chapter 23 Solutions
Economics (7th Edition) (What's New in Economics)
Ch. 23.A - Prob. 1RQCh. 23.A - Prob. 2RQCh. 23.A - Prob. 3RQCh. 23.A - Prob. 4RQCh. 23 - Prob. 23.1.1RQCh. 23 - Prob. 23.1.2RQCh. 23 - Prob. 23.1.3RQCh. 23 - Prob. 23.1.4PACh. 23 - Prob. 23.1.5PACh. 23 - Prob. 23.1.6PA
Ch. 23 - Prob. 23.1.7PACh. 23 - Prob. 23.1.8PACh. 23 - Prob. 23.1.9PACh. 23 - Prob. 23.2.1RQCh. 23 - Prob. 23.2.2RQCh. 23 - Prob. 23.2.3RQCh. 23 - Prob. 23.2.4RQCh. 23 - Prob. 23.2.5RQCh. 23 - Prob. 23.2.6PACh. 23 - Prob. 23.2.7PACh. 23 - Prob. 23.2.8PACh. 23 - Prob. 23.2.9PACh. 23 - Prob. 23.2.10PACh. 23 - Prob. 23.2.11PACh. 23 - Prob. 23.2.12PACh. 23 - Prob. 23.2.13PACh. 23 - Prob. 23.2.14PACh. 23 - Prob. 23.2.15PACh. 23 - Prob. 23.3.1RQCh. 23 - Prob. 23.3.2RQCh. 23 - Prob. 23.3.3RQCh. 23 - Prob. 23.3.4RQCh. 23 - Prob. 23.3.5RQCh. 23 - Prob. 23.3.6PACh. 23 - Prob. 23.3.7PACh. 23 - Prob. 23.3.8PACh. 23 - Prob. 23.3.9PACh. 23 - Prob. 23.3.10PACh. 23 - Prob. 23.3.12PACh. 23 - Prob. 23.4.1RQCh. 23 - Prob. 23.4.2RQCh. 23 - Prob. 23.4.3RQCh. 23 - Prob. 23.4.4PACh. 23 - Prob. 23.4.5PACh. 23 - Prob. 23.4.6PACh. 23 - Prob. 23.4.7PACh. 23 - Prob. 23.4.8PACh. 23 - Prob. 23.4.9PACh. 23 - Prob. 23.4.10PACh. 23 - Prob. 23.4.11PACh. 23 - Prob. 23.4.12PACh. 23 - Prob. 23.4.13PACh. 23 - Prob. 23.4.14PACh. 23 - Prob. 23.5.1RQCh. 23 - Prob. 23.5.2RQCh. 23 - Prob. 23.5.3RQCh. 23 - Prob. 23.5.4PACh. 23 - Prob. 23.5.5PACh. 23 - Prob. 23.5.6PACh. 23 - Prob. 23.1RDECh. 23 - Prob. 23.2CTECh. 23 - Prob. 23.3CTE
Knowledge Booster
Similar questions
- Which 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_forwardConsider an economy described by the following equations. Y= C + I + GC= 100 + .75 (Y - T)I= 500 - 50rG= 125T= 100 Where: Y is GDP, C is consumption, I is investment, G is government spending, T is taxes and r is the rate of interest. Answer the questions based on the following equations above. a. What is the value of the multiplier? b. What is the equilibrium equation for Y? Show your solution. c. Suppose the Central Bank policy is to adjust the money supply to maintain the interest rate at 4 percent, so r=4. What is the value of output? Show your solution. d. Assuming that no change in fiscal policy, what is the effect of a reduction in interest rate from 4 percent to 3 percent on equilibrium output. Show your solution. e. In this case, explain the policy that was used by the policymaker to target the aggregate demand.arrow_forwardUse the graph to answer the following questions: a)what is the value of the MPC? b)what is the value of the MPS?arrow_forward
- Use the graph to answer the questions that follow. a.What is the value of the MPC?b.What is the value of the MPS?c.What is the value of the multiplier?d.What is the amount of unplanned investment at aggregateoutput of 300, 900, and 1,300?arrow_forwardAnswer the following questions, which relate to the aggregate expenditures model:a. If Ca is $100, Ig is $50, Xn is -$10, and G is $30, what is the economy’s equilibrium GDP?b. If real GDP in an economy is currently $200, Ca is $100, Ig is $50, Xn is -$10, and G is $30, will the economy’s real GDP rise, fall, or stay the same?c. Suppose that full-employment (and full-capacity) output in an economy is $200. If Ca is $150, Ig is $50, Xn is -$10, and G is $30, what will be the macroeconomic result?arrow_forwardIn an economy of a specific country, the economy's consumption schedule is given in the table below. GDP=DI C 6500 6680 6800 6840 7000 7000 7200 7160 7400 7320 7600 7480 7800 7640 8000 7800 Use the above table information to answer the questions of part 1: Part 1: 1. If disposable income were $7800, how much would be saved? 2. What is the "break-even" level of disposable income? 3. What is this economy's marginal propensity to consume? 4. What is the average propensity to consume when disposable income is $7000? When disposable income is $8000? Part 2: 5. Suppose a $100 increase in desired investment spending ultimately results in a $300 increase in real GDP. What is the size of the multiplier? 6. If the MPS is .4, what is the multiplier? 7. If the MPC is .75, what is the multiplier? 8. Suppose investment spending initially increases by $50 billion in an economy whose MPC is 2/3. By how much will this ultimately change real GDP?arrow_forward
- based on macroeconomic theory, one of the following four answers is a correct description of the concept, “expenditure multiplier”. Which one? A/ It is the idea that decreasing national income affects the equilibrium level of GDP by the same amount of that decrease in income. B/ It is the concept that increasing national income affects the equilibrium level of GDP on par with the amount of increased income. C/ The expenditure multiplier is the idea that a given change in spending leads to an equal change in the equilibrium level of GDP. D/ It is the concept that an increase in spending causes a more than proportionate change in GDP.arrow_forwardClick on the icon to read the news clip, then complete the following steps. Business inventories fall when real GDP rises because 1800- 1600- Aggregate expenditure (billions of 2002 dollars) ○ A. inventories are falling from above target to their target levels 1400- B. firms put more production time into producing consumption goods and services OC. firms put more production time into producing exports 1200- OD. both B and C are correct 1000- The graph shows the aggregate planned expenditure curve. Draw a new AE curve to show the effect of an increase in exports and business investment. Label it AE₁. 8004 800 1000 1200 1400 45 degree line G AE 1600 1800 Draw a point at the new equilibrium expenditure. Draw an arrow along the new AE curve to show the effect of the increase in real GDP on consumption expenditure. Real GDP (billions of 2002 dollars) >>> Draw only the objects specified in the question. - News clip Business Inventories Decline, GDP Rises Real gross domestic product (GDP)…arrow_forwardQ1:You are given the following income-expenditures model for an economy : Consumption C = 300 + .64Yd Tax (T) = $60 Government expenditure G = $100 Investment (I) = $120 From above data calculate the follows: 1. Equilibrium level of income 2. At the equilibrium level of income, what is the amount of consumption?arrow_forward
- Question Aggregate expenditure is the total amount of spending in the economy that determines the level of the GDP. Components of aggregate expenditure are autonomous expenditure, planned private investments, government expenditure, and net exports. When autonomous expenditure increases or decreases, it has a multiplied effect on the GDP. Referring to the 10-year historical period that you chose for your final project, discuss an example of a change in autonomous spending. Research a government policy implemented during that time and discuss the multiplier effect it had on the economy. I have choosen 1980-1989 in the US. **This is not a research paper - it's just a quick brief for a discussion board**arrow_forwardUse the diagram to answer the question which one of the following will increase the size of the multiplier? A. an increase in the level of net exports B. An increase in the marginal propensity to consume C. an increase in the marginal propensity to save D. a reduction in the level of government spendingarrow_forwardSHORT ANSWER QUESTIONS Increase in foreign holdings of assets in the United States Exports of goods Imports of services Statistical discrepancy Net transfers Exports of services Imports of goods Income payments on investments Increase in U.S. holdings of assets in foreign countries Income received on investments b. the balance of trade c. the balance on the financial account $3,288 31. The following are hypothetical data on the U.S. balance of payments. You can assume the balance on capital account is zero. Use the data to calculate the following (SHOW YOUR WORK) a. the balance on the current account d. statistical discrepancy -$29 1 64 694 -1,520 -444 -3,286 545 12. State how each of the following will affect the relative values of the U.S. dollar and the British pound (say which currency appreciates and which currency depreciates): (a) U.S. citizens switch from buying stock in U.S. companies to buying stock in British companies. (b) The inflation rate in the United States decreases…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Economics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage Learning
Economics (MindTap Course List)
Economics
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Cengage Learning