ECO 2020 INCLUSIVE ACCESS
21st Edition
ISBN: 9781260564617
Author: McConnell
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Question
Chapter 31.2, Problem 2QQ
To determine
Equilibrium GDP .
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D4
a. Draw the circular flow of spending and income. Put a proper label on every box and flow.
b. Assume T, a, b, G, I, and NX are exogenous. Find GDP at equilibrium. Notice that
C=a+b*DI.
c. Now assume that a, b, G, I, and NX are exogenous but T=To+t*GDP. Find GDP at
equilibrium. (We did this in our class.)
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Chapter 31 Solutions
ECO 2020 INCLUSIVE ACCESS
Ch. 31.2 - Prob. 1QQCh. 31.2 - Prob. 2QQCh. 31.2 - Prob. 3QQCh. 31.2 - Prob. 4QQCh. 31.7 - Prob. 1QQCh. 31.7 - Prob. 2QQCh. 31.7 - Prob. 3QQCh. 31.7 - Prob. 4QQCh. 31 - Prob. 1DQCh. 31 - Prob. 2DQ
Ch. 31 - Prob. 3DQCh. 31 - Prob. 4DQCh. 31 - Prob. 5DQCh. 31 - Prob. 6DQCh. 31 - Prob. 7DQCh. 31 - Prob. 8DQCh. 31 - Prob. 1RQCh. 31 - Prob. 2RQCh. 31 - Prob. 3RQCh. 31 - Prob. 4RQCh. 31 - Prob. 5RQCh. 31 - Prob. 6RQCh. 31 - Prob. 7RQCh. 31 - Prob. 8RQCh. 31 - Prob. 9RQCh. 31 - Prob. 1PCh. 31 - Prob. 2PCh. 31 - Prob. 3PCh. 31 - Prob. 4PCh. 31 - Prob. 5PCh. 31 - Prob. 6PCh. 31 - Prob. 7PCh. 31 - Prob. 8PCh. 31 - Prob. 9PCh. 31 - Prob. 10P
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- a. Copy and paste table above and fill in aggregate demand (AD). b. Derive the consumption function.arrow_forwardWhat is the equilibrium in this economy? Planned Change in Net Exports (NX) Aggregate Expenditures (AE) Government Real GDP (Y) Consumption (C) Investment (1')| Purchases (G) Inventories 1500 1100 250 1600 1175 100 1700 1250 1800 1900 2000 75 Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a 1500 b 1600 1700 d. 1800arrow_forwardAssume that the Equilibrium GDP is $4,000 billion. The Potential GDP is $5,000 billion. The marginal propensity to consume is 4/5 (0.8). By how much and in what direction should government purchases be changed? a. increase by $1,000 billion. c. increase by $100 billion. b. decrease by $1,000 billion. d. increase by $200 billion.arrow_forward
- 5. The value of the U.S. dollar is expected to increase versus foreign currencies. Use the Aggregate Expenditure/Income model to: a. Determine whether Aggregate Expenditures will increase or decrease. b. Determine whether Inventories will increase or decrease. c. Determine whether Consumption will increase or decrease. d. Determine whether Real GDP/Income will increase or decrease. Explain Carefully.arrow_forwardA temporary increase in government expenditure will a. Shift the saving curve to the right b. Shift the investment curve to the right c. Shift the investment curve to the left d. Shift the saving curve to the leftarrow_forwardTotal planned expenditure is also called ______. a. Exports minus imports b. Aggregate demand c. Aggregate supply d. Revenues greater than expensesarrow_forward
- In the short-run aggregate expenditure model, if GDP is less than aggregate planned expenditures, output will a. decrease as business cut back on production due to rising inventory levels b. increase as business ramp up production due to falling inventory levels c. stay the same and prices will increasearrow_forward4) economy is in a recession and decrease(s) when the U.S. economy is expanding. A) Consumer spending B) Planned investment C) Net exports D) Unplanned investment usually increase(s) when the U.S.arrow_forwardIn a two-sector economy, Aggregate Expenditure (AE) equals Select one: A. C +1+G В. С C. C +|+ G + (X-M) D. C +| Given the following data GDP = RM11,920 billion; investment = RM 2,100 billion; government purchases = RM 3,450 billion. What does consumption equal? Select one: A. RM 6370 billion. B. RM 2100 billion. C. RM 9820 billion. D. RM 8470 billion. When income is equal to zero, consumption is equal to Select one: A. endogenous consumption B. autonomous consumption C. aggregate consumption D. induced consumptionarrow_forward
- a. By how much will GDP change if firms increase their investment by $11 billion and the MPC is 0.8? Instructions: Round your answers to the nearest whole number. The change in GDP $ billion. b. If the MPC is 0.5? The change in GDP = $ billion.arrow_forwardIarrow_forwardHow will an increase in taxes applied to businesses affect the GDP based on the Expenditure Approach? a. Negative effect on net exports b. Negative effect on the gross domestic capital formation c. Increase in government’s budget d. Positive effect on private consumptionarrow_forward
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