MACROECONOMICS
14th Edition
ISBN: 9781337794985
Author: Baumol
Publisher: CENGAGE L
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Question
Chapter 9.A, Problem 4TY
a)
To determine
To calculate: The equilibrium
b)
To determine
To Identify: Any recessionary or inflationary gap is there and is to be calculated.
c)
To determine
To describe: effects to the equilibrium GDP when investors become optimistic about country’s future and raise their investment to $600.
d)
To determine
To Identify: If any inflationary gap is occurred after increase in investment and is to be calculated.
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Answer 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?
Use the following equations for question 16.C = $400 +0.8Y I = $300 G = $200X = $300 -0.4Y
16. What is the equilibrium level of real GDP?
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?
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