Economics (7th Edition) (What's New in Economics)
7th Edition
ISBN: 9780134738321
Author: R. Glenn Hubbard, Anthony Patrick O'Brien
Publisher: PEARSON
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Question
Chapter 23, Problem 23.4.7PA
Subpart (a):
To determine
The equilibrium level of GDP and MPC.
Subpart (b):
To determine
The MPC of the economy.
Subpart (c):
To determine
The Multiplier value.
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Students have asked these similar questions
On the following graph, use the blue line (circle symbol) to plot this economy's consumption function based on these data.
?
CONSUMPTION (Billions of dollars)
700
600
500
400
300
200
100
0
-100
0
100
200
300
400
500
600
DISPOSABLE INCOME (Billions of dollars)
700
800
From the preceding data, you know that the level of savings in the economy last year was $
economy is
billion and the marginal propensity to save in this
Suppose that this year, disposable income is projected to be $500 billion. Based on your analysis, you would expect consumption to be $
billion and savings to be $
billion.
Consider 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.
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
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
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