Assume there is no government or foreign sector. If the multiplier is 2, a $20 billion increase in planned investment will cause aggregate output to increase by Select one: O a. $10 billion. O b. $20 billion. O c. $5 billion. O d. $40 billion.
Q: Suppose that consumer spending initially rises by $5 billion for every 1 percent rise in household…
A: * answer :- A)
Q: What is your prediction for the economy when you observe that inventories are taking an unplanned…
A: In an economy, unplanned Inventory refers to the amount of goods and services that are not planned…
Q: Suppose that consumer spending initially rises by $5 billion for every 1 percent rise in household…
A: Aggregate demand is a total demand for final goods and services in the domestic economy at a…
Q: Consumption .C C2 Income A movement from C to C2 could be caused by: O A. A lower tax rate. B. A…
A: A movement from C1 to C2 is caused by a decrease in the marginal propensity to consume. So, option…
Q: If the simple spending multiplier is 8, the marginal propensity to consume is O a. 8 1/4 wered O c.…
A: The spending multiplier represents the change in the real gross domestic product or aggregate…
Q: If investment increases by $100 and, as a result, gross domestic product (GDP) ultimately increases…
A: Change in investment=$100 Change in GDP=$200
Q: The transfer payment multiplier is smaller than the expenditure multiplier by the: O a. Transfer…
A: When talking about the multiplier impact of transfer payment and expenditure, it can be said that…
Q: If the multiplier is 5 and government expenditures increase by $200 billic OA) AD shifts left by…
A: Note: “Since you have asked multiple questions, we will solve the first question for you. If you…
Q: (c). Given a three sectof income dištribution model in which: Y = C +1, Ya = Y - T, C = Co + bYd,…
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A: The multiplier refers to how much change in the injection in any economy increases the level of…
Q: Aggregate planned expenditure decreases if O a. investment increases. O b. real GDP decreases. O c.…
A: Aggregate planned expenditure is computed as:
Q: A reduction in the tax rate might lead to an increase in the growth rate of potential output if... O…
A: Generally a reduction in tax rate is considered the fiscal expansionary role of central government…
Q: When the general price level falls Selectione Oa. investment falls as a result of the real wealth…
A: The fall in the general price level leads to a change in the spending of the consumers which is…
Q: If the marginal propensity to consume is equal to 0.70 and income rises by $20 billion in an…
A: The marginal propensity to consume measures the change in consumption when there is a change in the…
Q: Assume that Equilibrium GDP is £4,000 billion. Potential GDP is £5,000 billion. The marginal…
A: Given Information Marginal propensity to consume (MPC) = 0.8Spending multiplier = 1/(1-MPC)…
Q: 34 64. If the marginal propensity to save (MPS) is small, O a. make the simple multiplier larger. O…
A: Multiplier =1/1-MPC or 1/MPS
Q: Now consider an economy in which the government lowers its spending. In the long run, the result…
A: The amount of money allotted by the public sector for the purchase of goods and the provision of…
Q: What is the effect of an increase in investment? When investment increases, O A. aggregate demand…
A: Investment is the part of aggregate demand.
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A: Recession is the economic phase where the production level is low and economic activities are…
Q: What are the two equivalent formulas for investment multiplier? O A. 1 and MPC 1- MPS OB. 1- MPC MPC…
A: We know that aggregate output in closed economy is given by Y = C+I+GWhere C =c+MPC×YSo Y=…
Q: Assume that Consumption is C = c(1-t)Y; Investment / = -bi; Net Exports NX = x,YW + xR – m,Y + m,R…
A: Aggregate equilibrium in economy is achieved where aggregate demand in economy is fulfilled by…
Q: Suppose that income increases by 17 units and the marginal propensity to save is 1/4 (i.e. 0.25).…
A: here we calculate the change in consumption by using the consumption function so the calculation of…
Q: Say, the expenditure multiplier for an economy is 2. An increase in government spending by $300…
A: here we calculate how much economy boost due to government expenditure , so the calculation of the…
Q: An increase in the value of the simple multiplier can be caused by... O a. An increase in the net…
A: A simple multiplier broadly estimates the change in the economic output due to the change in the…
Q: Given the data shown in the table below, if planned investment increased by $100, the new…
A: GDP is the value of all final goods and services produced in an economy over a given period of time.…
Q: ter 12 Homework Saved Help Save & Exit Suppose that consumer spending initially rises by $5 billion…
A: Given-consumer spending initially rises by $5 billion for every 1 percent rise in household wealth…
Q: Refer to Figure 9.1. Assume the economy is initially at point A. The eventual change from a shock…
A: 1. In Short run, Equilibrium occurs when Aggregate Demand(AD) and short run aggregate supply(SRAS)…
Q: 2. In an economy without government purchases, transfers, or taxes, and without imports or exports,…
A: "Since you have asked a question with multiple sub-parts, we will solve the first three sub-parts…
Q: If investment increases by $200, and as a result GDP increases by $800, then the a) multiplier is…
A: Investments are injections to the economy. Increase in final GDP arising from a new injection is…
Q: LRAS SRAS P. AD $1000 $1200 Refer to Figure 34-11. Suppose the multiplier is 5 and the economy is…
A: Here, it is given that the economy is currently producing at point A and the potential output level…
Q: Assuming that the aggregate price level is constant, the interest rate is fixed, and there are no…
A: Using the concept of different multipliers we get change in real GDP.
Q: Suppose that consumer spending initially rises by $5 billion for every 1 percent rise in household…
A: Answer: It is given that for a 1% increase in household wealth the consumer spending will increase…
Q: Which of the following increases the size of the expenditure multiplier? a. a decrease in the…
A: Expenditure multiplier means how much times income will change due to change in expenditure . It…
Q: Figure 9.1 TE 45° TE=C+I2+G+(X-IM) TE:=C+I+G+(X-IM) AT=100 Y1 Y2 f the $100 increase in investment…
A: Income: It refers to the money that people gets every month for the work they do. The more income of…
Q: 9.)In an economy with no government and no foreign sec- tors, autonomous consumer spending is $250…
A: Given: Autonomous consumer spending is = $250 billion Planned investment spending is = $350 billion…
Q: Suppose that consumer spending initially rises by $5 billion for every 1 percent rise in household…
A:
Q: Suppose that the level of GDP increased by $100 billion in an economy where the marginal propensity…
A: The standard life of the added generated via the assembly of products and services during a country…
Q: Which of the following sets of variable changes will all cause the IS Curve to shift to the right? O…
A: Consumption, Investment, government spending and net exports are components of aggregate demand.…
Q: 9. Suppose Dina calculates her permanent income by adaptive expectations. Year 2010 Dina's permanent…
A: Milton Friedman's Permanent Income hypothesis asserts that an individual's consumption pattern is a…
Q: A $1.5 trillion increase in investment (a component of autonomous expenditure) leads equilibrium…
A: An increase in autonomous expenditure by $1.5 trillion leads to an increase in equilibrium…
Q: If the multiplier is 5 and investment increases by $3 billion, equilibrium real GDP will increase…
A: We are given, Multiplier = 5 Increase in investment = $3 billion To find, increase in equilibrium…
Q: The total expenditure in Macroland begins with these initial levels (in trillions of dollars): GDP =…
A: Consumption function: C = Ca + MPC (Y-T) Where C is consumption Ca is autonomous consumption MPC is…
Q: All of the following are true when there is an unplanned decrease in inventories, except: O a.…
A: Inventory is the set of goods, materials, and other items that helps to achieve the resale goal of…
Q: In the aggregate expenditure (AE) model, the economy is driven to its equilibrium by changes in O a.…
A: The aggregate expenditure method helps to understand the relationship between the economic…
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A: Production possibility curve shows the possible combinations of two goods that can be produced with…
Q: Which of the following will NOT shift the ADTT curve? O a. A rise in consumer confidence O b. A rise…
A: ADπ curve depicts the inverse relationship between π (i.e., inflation rate) and aggregate demand. An…
Q: Which of the following will NOT shift the ADTI curve? O a. A rise in government spending O b. A rise…
A: AD: Y= C+I+G+NX Y = National Income or output C= Consumption I = Investment G = Government Spending…
Q: 6. Suppose real GDP in an economy equals its potential output of $2,000 billion, the multiplier is…
A: HERE we can calculate the given as follow
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- In a closed economy with no government, aggregate expenditure is Select one: O a. None of the options O b. Net Tax plus Consumption O c. consumption plus the MPC O d. saving plus investment.The difference between planned and unplanned spending is Select one: O a. always negative O b. unplanned changes in inventories O c inventories O d. always positive1. What would happen to multiplier if investment were to be positively related to income? 2. is it possible for total saving to fall when people beome more thirfty? 3. What is meant by multiplier?Why shoul the value of multiplier rise when people spend more on consumption?
- Assume consumption is represented by the following: C = $400 + 0.5Y. Also assume that planned investment (/) equals $100. the level of Income that occurs at the equilibrium is Select one: O a. $100 O b. $150 O c. $500 O d. $1000Suppose that consumer spending initially rises by $5 billion for every 1 percent rise in household wealth and that investment spending initially rises by $20 billion for every 1 percentage point fall in the real interest rate. Also assume that the economy’s multiplier is 4. a. If household wealth falls by 5 percent because of declining house values, and the real interest rate falls by 3 percentage points, in what direction and by how much will the aggregate demand curve initially shift at each price level?2. In macroeconomic theory, total or aggregate spending is denoted by A and total or aggregateproduction of income by Y. Which one of the following statements is incorrect? A When A is greater than Y, there is disequilibrium and Y will tend to increase.B When A is equal to Y, there is equilibrium and Y will remain unchanged.C When A is less than Y, there is disequilibrium and Y will decrease.D When A is greater than Y, there is disequilibrium and A will decrease.
- (a) Suppose the price level in an economy rises while the money wage rate remains constant. What happens to the quantity of real GDP supplied. How will this affect the aggregate supply or aggregate demand curve? What if the potential GDP increases? Which aggregate curve is affected and how? (b) Real GDP Consumption Planned Investment Government Purchases Net Exports $1,000 $1,000 $100 $150 -$50 2,000 1,900 100 150 -50 3,000 2,800 100 150 -50 4,000 3,700 100 150 -50 From the table data provided, answer the following questions. The numbers in the table are in billions of dollars. Show all calculations. a. What is the equilibrium level of real GDP? b. What is the Marginal Propensity to Consume? c. What is the multiplier value in this economy? d. If potential GDP is $4,000 billion, is the economy at full employment? If not, what is the condition of the economy? e. If the economy is…Suppose that consumer spending initially rises by $5 billion for every 1 percent rise in household wealth and that investment spending initially rises by $20 billion for every 1 percentage point fall in the real interest rate. Also assume that the economy�s multiplier is 3. If household wealth falls by 6 percent because of declining house values, and the real interest rate falls by 2 percentage points, in what direction and by how much will the aggregate demand curve initially shift at each price level? The aggregate demand curve will shift_____ by $____ billion. In what direction and by how much will it eventually shift? The aggregate demand curve will shift_____ by $____ billion..(d) Suppose government spending increases by some amount AGo to become Go+AGo. Show the change in Y and C as a response to this increase in spending.
- Question 1) a) In panel (a) the curve shifts upward, what could cause this? O Increase in G (govermment spending)O Decrease in HH wealth due to a decrease in housing pricesO An increase in the overall price levelo Areduction in govemment spending (G) b) Using Figure 2, if this economy is currently at Y1 and consumer wealth increases, then___O AD1 will shift to the left, reflecting a decrease in the real GDP at every price level.O AD1 willshift to the right. reflecting an increase in the real GDP at every price level.O an upward movement along the AD1 wiltake place., reflecting an increase in the price level.O a downward movement along the AD1 will take place, reflecting a decrease in the price level.9. Suppose Amal calculates her permanent income by adaptive expectations . Year 2020 Amal's permanent income was 38,000 , and year 2021 actual income is 41,000 . Assume that , long - run marginal to consume is 0.90 and short - run marginal propensity to consume is 0.28 . What is her consumption expenditure year 2021 ? O 36.774 O 35,040 O 40.226 O 33.454 O 34.740 O None of the above is correctFor an economy the following functions have been given:C = 100 + 0.8YS = -100 + 0.2YI = 120 – 5rMs = 120Md = 0.2Y – 5rCalculate the following:5.1.1. IS equation 5.1.2. LM equation 5.1.3. Equilibrium level of income 5.1.4. Equilibrium level of interest rate. 5.1.5 Calculate National saving. 5.1.6 Calculate money demand 5.1.7 Find consumption
