Principles of Economics 2e
2nd Edition
ISBN: 9781947172364
Author: Steven A. Greenlaw; David Shapiro
Publisher: OpenStax
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Textbook Question
Chapter D, Problem 19CTQ
Exercise D19
What does it mean when the aggregate expenditure line crosses the 45-degrss line? In other words, how would you explain the intersection in words?
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Students have asked these similar questions
Refer to the figure below:
Insurance and
pensions 11.9%
Item
a. Entertainment
b. Transportation
c. Clothing
Housing
32.8%
Item Weight
0.053
0.159
0.03
Entertainment 5.3%
Transportation
15.9%
Price
Change
20%
-8%
100%
Health care 8.1%
Source: U.S. Bureau of Labor Statistics, Consumer Expenditure Survey (2018 data).
Use the item weights in the figure to determine the percentage change in the CPI that would result from a(n)
a. 20 percent increase in entertainment prices.
b. 8 percent decrease in transportation costs.
c. doubling of clothing prices.
(Note: Review the table titled "Computing Changes in the CPI" in your text for assistance.)
Instructions: Enter your responses as a percentage rounded to two decimal places. If you are entering any negative numbers be sure
to include a negative sign (-) in front of those numbers.
Food
12.9%
Impact on CPI
(Inflation Effect)
Clothing 3.0%
Miscellaneous 10.1%
What is the formulae to find Increase in sales?
Calculate MPS
The value of MPC is 0.62
Chapter D Solutions
Principles of Economics 2e
Ch. D - Exercise D6 What is on the axes of an...Ch. D - Exercise D7 What does the 45-degree line show?Ch. D - Exercise D8 What determines the slope of a...Ch. D - Exercise D9 What is the marginal propensity to...Ch. D - Exercise D10 Why are the investment function, the...Ch. D - Exercise D11 Why does the import function slope...Ch. D - Exercise D12 What are the components on which the...Ch. D - Exercise D13 Is the equilibrium in a Keynesian...Ch. D - Exercise D14 What is an inflationary gap? A...Ch. D - Exercise D15 What is the multiplier effect?
Ch. D - Exercise D16 Why are savings, taxes, and imports...Ch. D - Exercise D17 Will an economy with a high...Ch. D - Exercise D18 How do economists use the multiplier?Ch. D - Exercise D19 What does it mean when the aggregate...Ch. D - Exercise D20 Which model, the AD/AS or the AE...Ch. D - Exercise D21 What are some reasons that the...Ch. D - Exercise D22 What should the government do to...Ch. D - Exercise D23 Two counties are in a recession....Ch. D - Exercise D24 Compare two policies: a tax cut on...Ch. D - Exercise D25 What role does government play in...Ch. D - Exercise D26 If there is a recessionary gap of 100...Ch. D - Exercise D27 What other changes in the economy can...
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Similar questions
- Exercise D26 If there is a recessionary gap of 100 billion, should the gamut increase spending by 100 billion to close the gap? Why? Why not?arrow_forwardExercise D10 Why are the investment function, the government spending function, and the export function all drawn as flat lines?arrow_forwardExercise D16 Why are savings, taxes, and imports referred to as leakages in calculating the multiplier effect?arrow_forward
- Exercise D21 What are some reasons that the economy might be in a recession, and what is the appropriate government action to alleviate the recession?arrow_forwardExercise D22 What should the government do to relieve inflationary pressures if the aggregate expenditure is greater than potential GDP?arrow_forwardExercise D9 What is the marginal propensity to consume, and how is it related to the marginal propensity to import?arrow_forward
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