Answered: 3. When the following event occurs, the…

3. When the following event occurs, the change in Real GDP = Event: The government increases its education funding by $60 billion; the marginal propensity to consume is 0.6 the multiplier.

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter23: The Aggregate Expenditure Model

Section: Chapter Questions

Problem 6P

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Income and Expenditure — End of Chapter Problem An economy has a marginal propensity to consume of 0.5, and Y*, the income-expenditure equilibrium GDP, equals $500 billion. Given an autonomous increase in planned investment of $10 billion, answer the following questions. a. What is the value of the multiplier? Value of the multiplier = b. What would you expect the total change in Y* to be based on the multiplier formula? Change in Y* based on the multiplier = billion c. What is the total change in real GDP after the 10 rounds? It may be beneficial to make a table on a separate sheet of paper to calculate the change in real GDP for each of the rounds, and then add up the values. Total change in real GDP (10 rounds) = billion d. How do your answers to the change in GDP and Y compare? The answer to total change in GDP after 10 rounds and the change in Y* based on the multiplier formula are
An economy has a marginal propensity to consume of 0.5, and Y*, the income-expenditure equilibrium GDP, equals $500 billion. Given an autonomous increase in planned investment of $10 billion, answer the following questions. a. What is the value of the multiplier? Value of the multiplier = b. What would you expect the total change in Y* to be based on the multiplier formula? Change in Y* based on the multiplier = billion c. What is the total change in real GDP after the 10 rounds? It may be beneficial to make a table on a separate sheet of paper to calculate the change in real GDP for each of the rounds, and then add up the values. Total change in real GDP (10 rounds) =
1. If an increase in investment spending of $20 million results in a $200million increase in equilibrium real GDP, thenA. the multiplier is 10.B. the multiplier is .1.C. the multiplier is 100.D. the multiplier is 1.
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1) Following is information for the economy of Sparkle. All units are milliondollars. Their autonomous consumption is $700, and the marginal propensity to consume is 0.8.Investment spending is constant at $380, and government expenditure is constant at $300.Exports are constant at $500, and imports are constant at $800. Net taxes are constant at $100.Calculate and state your answers for the following questions.a) What is the value of consumption in this economy when the real GDP is $1100?b) What is the value of autonomous aggregate planned expenditure i.e. AE0?c) What is the value of equilibrium aggregate expenditure for this economy?d) What is the value of unplanned changes in the inventory investment when real GDP is$4000?e) What is the size of the multiplier in this economy?f) If investment spending increases by $50, what would be the value of the change in theequilibrium real GDP?