Macroeconomics
13th Edition
ISBN: 9780134735696
Author: PARKIN, Michael
Publisher: Pearson,
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Chapter 28, Problem 33APA
(a)
To determine
Identify the changes in the aggregate expenditure curve and equilibrium expenditure, and illustrate them on a graph.
(b)
To determine
Identify the effects on autonomous expenditure or induced expenditure and the influence of the multiplier.
(c)
To determine
Identify the value of the autonomous expenditure multiplier.
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Based on the following information:
C = 40 + 0.7Yd, T = Tg – R, I = 200, G = 350, Tg = 60, R = 40
calculate the equilibrium level of income (Ye).
calculate the value of kG, kTg and kR, where k is the multiplier..
calculate the values of C, S and T at Ye level.
calculate the new equilibrium level of income if I increases by 10 percent.
if G increases to 550 units and it is fully funded by the rise in T, what is the impact
on Ye?
if Tg increases to 85 units and R increases to 50 units, what is the effect on the
level of Ye?
Given the following information.
C = 600 + 0.8Yd , Yd = Y – T, Tg = 100, I= 200, R = 50, G = 350,
X = 250 and M = 200 + 0.1Y.
Calculate the equilibrium level of income (Ye).
Show the equilibrium level of income by using diagrams of both aggregate
expenditure-income (AE-Y) approach and injection-leakage approach,
How much investment should be increased if the government wants to increase
the national income by 2000?
How much tax has to be reduced so that…
Given the information below, answer the questions that follow.
C = $40 + 0.8Y I = $30 G = $40 X – M = -$10
a) What is the equilibrium GDP? Explain why $550 is not the equilibrium.
b) What is the marginal propensity to consume (MPC) in this question? (Explain)
c) What is the multiplier in this question and explain the significance of the multiplier? (Show all work)
d) Assuming that the full employment level of output is $600, what kind of gap exists and how large is it? Explain
e) If transfer payments increased by $10 and the price level did not change, what would the new equilibrium be? (Show all work)
f) How would your answer to part (e) change if the price level did change?
Assume you have the following model of the expenditure sector:AD = C + I + G + NX
C = Co + cYD
YD = Y - TA + TR
TA = TAo TR = TRo
I = Io
G = Go
NX = NXo
a. If a change in income by ∆Y = - 800 leads to a change in savings by ∆S = - 160, what is the size of the expenditure multiplier?
c. If a change in exports by NX = - 200 is accompanied by a change in consumption by ∆C = - 800, what is the size of the expenditure multiplier?
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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- Given the information below, answer the questions that follow. C = $40 + 0.75Y I = $30 G = $40 X – M = $10 a) What is the equilibrium GDP? Explain why $550 is not the equilibrium. b) What is the marginal propensity to consume (MPC) in this question? (Explain) c) What is the multiplier in this question and explain the significance of the multiplier?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_forwardConsider the graph below: Planned aggregate expenditure (PAE, billions of $) 1,000 900 800 700 600 500 400 300 200 100 PAE = Y PAE 2 PAE1 600 500 400 300 200 100 Actual aggregate expenditure (output or GDP, billions of $) >1000 900 800 700 Instructions: In part a, round your answer to the nearest whole number. In part b, round your answer to one decimal place. a. The expenditure multiplier in this economy is: b. The marginal propensity to consume in this economy is:arrow_forward
- Using the table below to answer the following questions. Assume all values represent trillions of dollars. Construct a graph of the Aggregate planned expenditure What is the equilibrium expenditure? Explain what happens at a real GDP of $4 trillion dollars. (Note the aggregate expenditures and the effects on inventories) What are your total autonomous expenditures? What is the marginal propensity to consume? Ignoring imports and income taxes, what is the multiplier? If investment increases by $1.5 trillion, what is the change in real GDP?arrow_forwardAssume: Y= C + I + G + NX C = 400 + (0.8)YD Io = 200 G = 300 + (0.1)(Y* - Y) YD = Y - TA + TR NXo = - 40 TA = (0.25)Y TRo = 50 Assume the equation for net exports changes from NXo= - 40 to NX1 = - 40 - mY. How would this affect expenditure multiplier, if we assume that 0 < m < 1?arrow_forwardConsider an economy where the various components of expenditure follow these equations: C = 10 + 0.8Yd I = 500 G = 100 X = 300 М — 0.1Y T = 0.1Y c. Calculate the equilibrium level of GDP in this economy, highlighting what are the values of the Keynesian multiplier and the autonomous components of expenditure.arrow_forward
- Suppose the United States economy is represented by the following equations: Z = C + I + G C = 500 + .5YD T = 600 I = 300 YD = Y - T G = 2000 Given the above variables, calculate the equilibrium level of output. Now, assume that taxes increase from 600 to 700. What is the new equilibrium level of output? How much does income change as a result of this event? What is the multiplier for this economy?arrow_forwardPRICE LEVEL Suppose there is some hypothetical economy in which households spend $0.50 of each additional dollar they earn and save the $0.50 they have left over. The following graph plots the economy's initial aggregate demand curve (AD₁). Suppose now that the government increases its purchases by $2 billion. Use the green line (triangle symbol) on the following graph to show the aggregate demand curve (AD₂) after the multiplier effect takes place. Hint: Be sure the new aggregate demand curve (AD2) is parallel to AD1. You can see the slope of AD₁ by selecting it on the following graph. 116 114 112 110 AD₁ 108 106 104 12 102 100 100 102 104 106 108 110 112 114 116 38.3¢ AD 3 (?)arrow_forward4. Consider the following is the economy of Country W: C = 100 + 0.8Y I = 150 Answer the following questions: a) Determine the equilibrium level of output algebraically using the aggregate expenditure approach. b) Graphically illustrate the equilibrium level of output from part (a). c) Suppose that the initial aggregate output is 550. Calculate the change in inventories that will occur in this period.arrow_forward
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