MACROECONOMICS
14th Edition
ISBN: 9781337794985
Author: Baumol
Publisher: CENGAGE L
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Question
Chapter 9.B, Problem 2TY
To determine
To Draw: 45°line diagram and the equilibrium
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Potential
GDP|
' 45°
C+1+(X-IM)
4,800
B
3,200
3,000 4,000 5,000
2. Use the graph above to answer the following questions:
a. Calculate the MPC:
b. What is the equilibrium value of GDP?_
Real Expenditure
(billions of dollars per year)
This question has four parts. (its not a writing assignment, just asking for a numerical value or simple answer)
1.1. What is the US GDP for the first quarter and second quarter of 2020? What is the personal consumption expenditures for the first quarter and second quarter of 2020?
Go to the website for the Bureau of Economic Analyses (BEA): https://www.bea.gov/
Section 1: Domestic Product and Income; Table 1.1.5
1.2. Use the information in Table 1 to analyze aggregate expenditures (AE) model below (Figure 1. Equilibrium in a Private Closed Economy). (table 1 and figure 1 are in the attachments)
1.3. Identify the mistake and explain why the graph of the aggregate expenditures line does not correctly illustrate the economy's equilibrium.
1.4. Create a graph for the aggregate expenditures (AE) model using the data from Table 1: A Private Closed Economy.
Tips: Remember, the 45degree line (also known as the Keynesian Cross) is a tool that shows how differences in aggregate…
Use the following information to complete the calculations.
C = 15235 + 0.67Y
I = 8777
G = 3425
NX = -551
What is the value of autonomous expenditure (AE)? Round your answer to the nearest dollar.
AE: $
Calculate the equilibrium level of GDP. Round your answer to the nearest dollar.
GDP: $
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- Q3 In a simple macroeconomic model, the value of national income Y may be found by solving the system: G= 250 (government expenditure) T= 50 (taxation) I= 100 (planned investment) C = 0.75Yd + 150 (consumption) where disposable income Yd = Y – T. (a) Calculate the equilibrium level of national income. (b) Calculate the total increase in government expenditure and investment needed to increase the equilibrium level of national income by 20.arrow_forwardAssume an economy has a consumption function of C = 0.87 (Yd) + $270.18. Additionally, this economy has investment spending = $878.78, government purchases $299.38, taxes = $111.59, exports = $209.28, and imports $289.40. What is the equilibrium level of GDP based on this information? Round your answer to two digits after the decimal. =arrow_forwardWhich of the following is true: a) at equilibrium aggregate expenditure is greater than gross domestic expenditure. b) at equilibrium GDP is greater than gross domestic expenditure. c) at equilibrium aggregate expenditure is smaller than gross domestic expenditure. d) at equilibrium GDP is smaller than gross domestic expenditure or e) at equilibrium both aggregate expenditure and GDP are smaller than gross domestic expenditurearrow_forward
- Calculate the four components of aggregate expenditure and GDP for the following economy using data from the table below. Instructions: Enter your responses as whole numbers. If you are entering any negative numbers, be sure to include a negative (-) sign in front of those numbers. Consumption expenditures Exports Government purchases of goods and services Construction of new homes and apartments Sales of existing homes and apartments Imports GDP Beginning-of-year inventory stocks End-of-year inventory stocks Business fixed investment Government payments to retirees Household purchases of durable goods Consumption expenditures: $ Investment expenditures: $ Government Purchases: $ Net Exports: $ GDP: $ $800 $50 $200 $200 $200 $125 $100 $100 $100 $100 $150arrow_forwardBased on the assumptions of the aggregate expenditure model, the equilibrium level of aggregate expenditure in this economy is equal A) Actual aggregate income and output (GDP). B) potential income and output (full employment GDP) C) less than the aggregate income and output (GDP) D) more than the aggregate income and output (GDP)arrow_forwardBased on this definition, indicate which of the transactions in the following table will be included in (that is, directly increase) the GDP of the United States in 2019.arrow_forward
- Create a graph for the aggregate expenditures (AE) model in Excel using the data from Table 1: A Private Closed Economy. Table 1 A Private Closed Economy Real domestic output (GDP=DI) (billions) Consumption (billions) Saving (billions) Investment (billions) Aggregate Expenditures (billions) $240 260 280 300 320 340 360 380 400 $244 260 276 292 308 324 340 356 372 $ -4 0 4 8 12 16 20 24 28 $16 16 16 16 16 16 16 16 16 $260 276 292 308 324 340 356 372 388arrow_forwardJust answer the chart and the questions provided in the picture (Base (Base Yr Yr =2020) Nominal Rasi (1) (3) (4) Total Production с Xa Aggregate Expenditures (Real GDP) C++X 14.0 Column (5) below represents aggregate expenditures (AE-C+1₂+G=X) for an economy when there is no government spending or taxing (G-T-50) and Real GDP-PI-DI (5) (6) Aggregate (8) (7) After-tax Consumption Aggregate Expenditures Caft Caft+I+X+G Expenditures $100 $100 $80 $0 $180 $ $200 $160 $ 80 $0 $240 S C+1₂+X+G $ S $300 $220 $ $ $ 80 $0 $300 $ $400 $280 $ $ $ 80 SO $360 $ $500 $340 $ 80 $0 $420 $ $ $ $600 $400 $ 80 $ 0 $480 $ S $ $700 $460 $ 80 $0 $540 $ S S i. What is the equilibrium level of GDP (where TP-AE) with no government spending or taxing? Suppose the government now spends $80 billion at each level of GDP and taxes remain at zero. Now fill in the new AE in column (6) above. ii. What is equilibrium GDP (where TP=AE) with this level of government spending? iii. MPS- Calculate the marginal propensities…arrow_forwardThe following table shows data on personal consumption expenditures, gross private domestic investment, exports, imports, and government consumption expenditures and gross investment for the United States in 2007, as published by the Bureau of Economic Analysis. All figures are in billions of dollars. Fill in the missing cells in the following table to calculate GDP. Components Personal Consumption Expenditures (CC) $9,734.2 Gross Private Domestic Investment (II) $2,125.4 Exports (XX) $1,643 Imports (MM) $2,351 Net exports of goods and services (X−MX−M) Government Consumption Expenditures and Gross Investment (GG) $2,689.8 Gross domestic product (GDP) This method of calculating GDP, which involves summing the , is called the approach.arrow_forward
- Suppose the aggregate expenditure schedule for an economy is given by the equation: AE = 800 + 0.8Y Where AE represents the aggregate expenditure and Y represents the national income (output) level. Calculate the equilibrium level of national income in this economy.arrow_forwardAssume the following model of the expenditure sector: S=C+I+G+Nx TR=100 C=420+(4/5)YD I=160 G=180 Nx=-40 YD=Y+TR-TA TA=(1/6)Y If the government would like to increase the equilibrium level of output (Y) to the full employment level Y*=2,700, by how much should government purchases (G) be changed?arrow_forwardFrom the graph above, complete the aggregate expenditure function from the information provided. ( AE = ___ + ___Yarrow_forward
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