MACROECONOMICS FOR TODAY
10th Edition
ISBN: 9781337613057
Author: Tucker
Publisher: CENGAGE L
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Chapter P3, Problem 2KC
To determine
The
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Aggregate Variables
Value (in billions of dollars) in the base year
Consumption spending
$900
Investment spending
$400
Government spending
$200
Transfer payments
$60
The marginal propensity to save is equal to 0.4 and there are no exports or imports,
(a) Calculate the real GDP in this country, Show your work
(b) Calculate the marginal propensity to consume Show your work.
(c) Suppose that the government increases spending from $200 billion to $300 billion
(i) Calculate the maximum change in real GDP. Show your work
(ii) Given the change in real GDP in part (c)(i), calculate the maximum level of the new equilibrium real GDP. Show your work
(d) Suppose that taxes decrease by $100 billion. Will the maximum change in real GDP be larger than, smaller than, or equal to the change in part (c)(i)? Explain.
Total Output Planned Aggregate Expenditures (Two-Sector Economy)(Real GDP in billion dollars) (in billions) 5,000 5,250 5,500 5,500 6,000 5,750 6,500 6,000 7,000 6,250
a) If the current output rate is $5.0 trillion, what will tend to happen to business…
Budget Analysis (9’)
The table below presents a brief summary of City A’s total spending, local GDP, and population changes. Read the table and answer the following questions.
2010
2020
Total spending ($ million)
89
104.12
Local GDP ($ millions)
110
134
Population
50,000
56,275
CPI deflators (2012=1)
0.96
1.05
Assuming City A’s population grows at a constant rate in the next decade. Based on the information in the table, estimate City A’s population in 2030.
Calculate per capita spending in 2010 and 2020, respectively, using constant dollars.
Calculate the compound annual growth rate of per capita spending from 2010 to 2020
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