Assuming that the economy shown in the figure below is in equilibrium, calculate the recessionary or inflationary gap in each case below. AS 350 AD 300 250 200 150 100 50 O 100 200 300 400 500 600 700 800 900 1000 Real GDP a. Potential GDP (LAS) is $300 then there is a(n) (Click to select) ♥ gap of $| | (Click to select) b. Potential GDP (LAS) is $600 then there is a(n) inflationary recessionary ]gap of $ c. Potential GDP (LAS) is $750 then there is a(n) [(Click to select) ♥ gap of $| Price index

Assuming that the economy shown in the figure below is in equilibrium, calculate the recessionary or inflationary gap in each case below. AS 350 AD 300 250 200 150 100 50 O 100 200 300 400 500 600 700 800 900 1000 Real GDP a. Potential GDP (LAS) is $300 then there is a(n) (Click to select) ♥ gap of $| | (Click to select) b. Potential GDP (LAS) is $600 then there is a(n) inflationary recessionary ]gap of $ c. Potential GDP (LAS) is $750 then there is a(n) [(Click to select) ♥ gap of $| Price index

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter9: Demand-side Equilibrium: Unemployment Or Inflation?

Section9.A: The Simple Algebra Of Income Determination And The Multiplier

Problem 4TY

See similar textbooks

Similar questions

Exercise D24 Compare two policies: a tax cut on income or an increase in government spending on roads and bridges. What are both the short-term and longâ€”term impacts of such policies on the economy?
a. What is the equilibrium rate of real GDP? $ __ billion b. If full-employment real GDP is $800 billion, what problem does this economy have? multiple choice This economy has a recessionary gap. This economy has an inflationary gap. This economy does not have a problem. c. How large is the real GDP gap? $ __ billion
If the economy is in a recessionary period how, specifically, might the government use their three tools? three tools change the tax rate change the level of govertment spending change transfer payments
During the 1930s the U.S. entered the Great Depression. During the Great depression investment fell from a yearly rate of $16.7 billion to $1.7 billion. In 1932, President Hoover increased income taxes. Assume the MPC is .92 C). If the AD shortfall in 1934 was $300 billion, what change in government expenditures on goods and services (G) would you have recommended to restore full-employment? D). If the AD shortfall in 1934 was $300 billion, what change in income/transfer payments would you have recommended ? E). If the AD shortfall in 1934 was $300 billion, what change in income taxes would you have recommended ?
Find the equilibrium level of national income in the basic Keynesian macroeconomicmodel. C = 40 + 0.5YI = 200
Give typed solution only assume an economy has an MPC of .5 and their full employment level of output is $500 billion. If their current GDP is $600 billion, what could their government do to try ans correct this? a) decrease taxes by $50 billion b) decrease government spending by $50 billion c) increase government spending by $50 billion d) increase taxes by $50 billion
Consider an economy described by the following set of equations: c = 120 +0.08Y I = 320 G = 480 X-IM = -80 T = 400 a. Find the actual level of GDP. b. If full employment comes at Y = 1000, would there be a recessionary gap or an inflationary gap? c. What spending changes will be necessary to eliminate this gap? d. What amount of tax changes will be necessary to eliminate this gap? e. What are some policies action that can be taken.
Q-1 The following table shows income and consumption: Calculate: A- Saving (S), B- Marginal propensity to consume (MPC), C-Marginal propensity to save (MPS), D- Average propensity to consume (APC) E- Average propensity to save (APS). Q-2 Compute the (a) Number of unemployed, (b) Unemployment-rate, (c) Population, and (d) Labor force participation rate, using this data: Number of employed = 1800 million Not in labour force =730 million Number of Labour force =2500 million Q-3 Discuss how to control or reduce the Inflation and Unemployment.
Assume 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 Assume you increase both government purchases (G) and taxes (TA) by the same lump sum of deltaG=deltaTA=+300. Would this be sufficent to reach the full employment level of output at Y*=2700? Why or why not?
You are given the following information about a closed economy with no government:Consumption = 115 + 0.6YInvestment = 550Use the above information to answer the questions that follow:Q.4.4 Is the equilibrium level of income also the full employment level of income? Explainyour answer.(3)
b. From the Intertemporal Choice Model, many theories (non-Keynesian theories ofConsumption) came into being. Using graphical and mathematical expressions, compareand contrast the following theories on consumption behaviours:i. Franco Modigliani: Life-Cycle Hypothesisii. Milton Friedman: Permanent-Income Hypothesisiii. Robert Hall: Random Walk Hypothesis
Only typed answer and please don't use chatgpt Why will temporary tax increase be insignificant in reducing consumption expenditures by the amount expected a. Because viewed the tax increase as permanent. b. Because people choose to increase their savings. C become people viewed taco increases temporarily d. Consumption expenditure are not related to level of taxtation