Macroeconomics
13th Edition
ISBN: 9780134735696
Author: PARKIN, Michael
Publisher: Pearson,
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Question
Chapter 28, Problem 21APA
(a)
To determine
Identify the aggregate expenditure when the real GDP is $200 billion.
(b)
To determine
Identify the process of movement toward the equilibrium expenditure when the real GDP is $200 billion.
(c)
To determine
Identify the process that moves toward equilibrium expenditure when the real GDP is $500 billion.
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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
Click 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)…
Use the table below to answer the following questions.
Real Consumptio
GDP
n
$300
310
320
330
340
350
360
$290
298
306
314
322
330
338
(a) What is the size of the multiplier in this economy? Now, calculate the multiplier when the MPS is .5, .25, .10. What is the relationship
between MPS and the multiplier?
(b) If taxes were zero, government purchases were $10, investments $6, and net exports were zero, what is the equilibrium GDP?
(c) If taxes are $5, government purchases are $10, investment is $6, and net exports are zero, what is the equilibrium GDP?
(d) Assume that investment, net exports, and taxes are zero. Government purchases are $30, and the full-employment GDP without inflation
is $330. How much must government spending be reduced to eliminate the inflationary expenditure gap?
Chapter 28 Solutions
Macroeconomics
Ch. 28.1 - Prob. 1RQCh. 28.1 - Prob. 2RQCh. 28.1 - Prob. 3RQCh. 28.2 - Prob. 1RQCh. 28.2 - Prob. 2RQCh. 28.2 - Prob. 3RQCh. 28.2 - Prob. 4RQCh. 28.3 - Prob. 1RQCh. 28.3 - Prob. 2RQCh. 28.3 - Prob. 3RQ
Ch. 28.4 - Prob. 1RQCh. 28.4 - Prob. 2RQCh. 28.4 - Prob. 3RQCh. 28.4 - Prob. 4RQCh. 28 - Prob. 1SPACh. 28 - Prob. 2SPACh. 28 - Prob. 3SPACh. 28 - Prob. 4SPACh. 28 - Prob. 5SPACh. 28 - Prob. 6SPACh. 28 - Prob. 7SPACh. 28 - Prob. 8SPACh. 28 - Prob. 9SPACh. 28 - Prob. 10SPACh. 28 - Prob. 11SPACh. 28 - Prob. 12SPACh. 28 - Prob. 13SPACh. 28 - Prob. 14SPACh. 28 - Prob. 15APACh. 28 - Prob. 16APACh. 28 - Prob. 17APACh. 28 - Prob. 18APACh. 28 - Prob. 19APACh. 28 - Prob. 20APACh. 28 - Prob. 21APACh. 28 - Prob. 22APACh. 28 - Prob. 23APACh. 28 - Prob. 24APACh. 28 - Prob. 25APACh. 28 - Prob. 26APACh. 28 - Prob. 27APACh. 28 - Prob. 28APACh. 28 - Prob. 29APACh. 28 - Prob. 30APACh. 28 - Prob. 31APACh. 28 - Prob. 32APACh. 28 - Prob. 33APACh. 28 - Prob. 34APA
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- Consider the graph below: Planned Aggregate Expenditure (PAE, billions of $) 1000 900 800 700 600 500 400 300 200 100 0 100 200 300 400 500 600 700 800 1 PAE 2 PAE Y PAE₁ 900 1000 Actual Aggregate Expenditure (Output or GDP, billions of $) a. What is the expenditure multiplier in this economy? b. What is the marginal propensity to consume in this economy?arrow_forwardExplain the basic idea of the expenditure multiplier and the role consumers' play.arrow_forwardTHE AGGREGATE EXPENDITURE MODEL (IN THE SHORT RUN)YOU MUST SHOW YOUR CALCULATIONS IN THE SPACE BELOWFOR THE NEXT PROBLEM USE THE FOLLOWING FORMULA:CHANGE IN GDP = [ 1 / (1-MPC) ] * CHANGE IN GInitially, the economy is producing $13 trillion in goods and services and the government is spending $2 trillion.Then the government decides to increase its spending to $2.7 trillion. What is the value of the spending multiplier?arrow_forward
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