Consider a hypothetical country in which, initially, real GDP equals potential GDP. Suppose that the government purchases increase. All else equal (with regard to the AD-IA model), relative to the baseline level, in the long run, consumption is: A. higher. B. lower. C. the same.
Q: According to the AS-AD model, which of the following is true about output when there is an increase…
A: "Macro-economic equilibrium is attained at a point where aggregate demand (AD) equates(intersects)…
Q: For each of the following shocksidentify what component() of planned aggregate expenditure is/ are…
A: Note: Since we only answer up to 3 sub-parts, we’ll answer the first 3. Please resubmit the question…
Q: In the simple Keynesian model, if aggregate expenditure is less than GDP, output will a)decline as…
A: The expenditure-output model displays the relationship between aggregate expenditure and economic…
Q: If an economy is to the left of the equilibrium level of GDP on the Keynesian cross diagram, then…
A: In the Keynesian model, the aggregate expenditures in the economy can be determined using the…
Q: If aggregate expenditures are equal to 15,000, and GDP is 20,000, then unplanned investment is…
A: At equilibrium, Aggregate expenditure is equal to GDP. That means planned expenditure equal to GDP.…
Q: In a closed economy Keynesian Cross framework, show how a decline in investment will lead to a fall…
A: A closed economy is one that doesn't trade with other countries. As a result, the closed economy is…
Q: In the short-run aggregate expenditure model, if GDP is less than aggregate planned expenditures,…
A: The correct solution is option b.
Q: In the Keynesian cross model, assume that the consumption function is given by C=$170+0.7(Y-T)…
A: Goods market gets equilibrium when Aggregate demand and aggregate supply are equal . At equilibrium…
Q: Westeros has recently discovered a new technology that would potentially increase profit for most…
A: (Since you have a posted a question with multiple sub-parts, we will solve the first three sub-part…
Q: Consider the simple macro model with a constant price level and determined output. Suppose the level…
A: 1. Consider a simple macro model with a constant price level and demand - determined output . Given…
Q: Consider a Keynesian economy with no taxes and no international trade. • The economy initially has a…
A: Here,given information is: Initial real GDP: $500 Change in consumption by Andy: $70 (spent on…
Q: Suppose that the government wants to raise investment but keep output constant. In the IS-LM model,…
A: The Macroeconomic Policy Mix:It should be clear that fiscal and monetary policy can be used in…
Q: Suppose Y = C+ I + G C = 900 +.75(Y) I = 300 G = 400 a. Calculate the equilibrium GDP
A: GDP measures the value of goods and services produced within an economy in a given period of time.
Q: Assume a technological advance lead to lower production costs. Show the effect this will have on…
A: Meaning of Aggregate Demand and Aggregate Supply: The term aggregate demand refers to the…
Q: Assume a hypothetical closed economy. The National income identity expression for this economy is…
A: National income refers to the total money income earned by the citizens of a country in a particular…
Q: Suppose, initially the Australian economy is at full employment (in other words the economy is at…
A: The following cases are analyzed as follows:
Q: Suppose MPC = 0.8 and government spending increases by 1 trillion dollars. In the AD-AS equilibrium,…
A: The macroeconomic equilbrium in an economy is determined by the aggregate demand and aggregate…
Q: Consider the basic Keynesian-cross model (without government or foreign sectors), where the marginal…
A: Given information: Marginal propensity to consume (MPC)= 0.60 (60 cents) Autonomous consumption=…
Q: In both the classical and the Keynesian model, savings equal investment in a balanced-economy…
A: Keynes believed that saving and investment are equal. According to him, saving and investment…
Q: Using graphical illustration of AS-AD framework, show the effects of following events on real output…
A: 1) Government raises taxes by $100 billion. This would lead to a reduction in disposable income as…
Q: Assume a hypothetical closed economy. The National income identity expression for this economy is…
A: The national income is the total income earned by all the people of a country in a particular period…
Q: Consider a standard AD-AS model. If the marginal propensity to consume is zero, a temporary tax cut…
A: Here, MPC=0, which means all the income is saved or Income=MPS As we can see the purple line is the…
Q: According to the IS-LM model, what happens to the interest rate,income,consumption and investment…
A: IS-LM model IS and LM model is used to show the relationship between the interest rate and output…
Q: In the simple Keynesian model, a $1bn decrease in net taxes (T) will lead to an increase in output…
A: Given information Tax is decreased by $1 bn This will have impact on Y Y=C+I+G+X-M C= a+b(Y-t)
Q: Use the Keynesian cross to predict the impact on equilibrium GDP of equal-sized increases in both…
A: The gross domestic product refers to the total amount of all the goods and services produced in an…
Q: What role do inventories play in the equilibrating process in the simple Keynesian model (as…
A: The inventories are the unsold stock of output in the economy. Thus, it is unsold goods and services…
Q: Use the keynesian cross to predict the impact of:A.an increase in government purchase. B.an increase…
A: According to keynesian cross model,aggregate demand would depend on government purchase and taxes.
Q: Assume a technological advance lead to lower production costs. Show the effect this will have on…
A: Assuming a classical model, a technological advancement allows the economy to increase its…
Q: In the Keynesian-Cross model, if autonomous investment increases by 100 and government transfers…
A: Question is talked about Keynesian-Cross model Autonomous Investment Increase by 100 Government…
Q: When using the Aggregate Expenditures model (or Simple Keynesian Model) Increasing taxes and…
A: The aggregate expenditure model links spending components (consumption, investment, government…
Q: In the simple Keynesian model, evaluate the multiplier of public expenditures, the multiplier of…
A: The simple Keynesian model is given as- The Tax multiplier is given as-
Q: using the Keynesian AD-AS diagram how can the economy be in a state of equilibrium at any level of…
A: The equilibrium is an economic state where Aggregate Demand (AD) intersects Aggregate Supply (AS)…
Q: If the intersection of AD and SRAS occurs at $21 trillion GDP but full employment GDP (LRAS) is at…
A: b) All of the choices would help increase AD and bring the economy closer to full employment
Q: The Aggregate Expenditure or Keynesian macroeconomics model is based upon the theory that the level…
A: The total monetary or market value of all finished goods and services produced within a country's…
Q: Insert the missing word or phrase: When planned aggregate spending does NOT equal current GDP,…
A: Aggregate Spending is the aggregate expenditure which is sum of consumption and investment.
Q: n the IS-LM model, an equal increase in government expenditure and tax will ...... , ....... and…
A: In the Keynesian macroeconomic model, IS-LM stands for Investment Saving and Liquidity Choice. The…
Q: Consider the following Keynesian macroeconomic model Y = C +1+G C = 200 + 0.8Y = 1000 – 2000R -…
A: Here, We are given that, Y=C+I+G ..(1) C= 200 + 0.8Y ..(2) I=1000 - 2000R ..(3)…
Q: Consider the graphical representation of the Keynesian cross for a hypothetical country, where the…
A:
Q: Suppose that the government increases its spending by 50$. If the MPC (marginal propensity to…
A: In an economy, short run equilibrium level of output is determined at a level where aggregate demand…
Q: In macroeconomic theory, total or aggregate spending is denoted by A and total or aggregate…
A: The macroeconomic theory includes the macro-level components and deals with the national income,…
Q: Many students are impressed by the Keynesian multiplier effect of government spending when they…
A: Based on whether areas of govt spending were curtailed, the UK government would have a considerable…
Q: Using the simple keynesian model, Let Y = C + I +G (Closed Economy) C = 1000 + .6Y I= 800 G= 1000…
A: Since you have asked multiple question, we will solve the first question for you. If you want any…
Q: n the Keynesian cross model, assume that the consumption function is given by C = 100 + 0.75(Y - T).…
A: Spending refers to the amount of total expenditure incurred by consumers, manufacturers and…
Q: Which one of the following statements is false? Keynes thought that the interest rate was the most…
A: Investment plans, according to Keynes, are determined by evaluating the marginal efficiency of…
Q: The simple (fixed r, fixed P, fixed W) Keynesian model C=300+0.75 YD I=310…
A: Aggregate expenditure function (closed economy): AE = C + I + G => AE = 300 + 0.75(Y-T) + 310 +…
Q: Which component of spending was the largest contributing factor to the downturn in spending during…
A: Investment was the largest contributing factor to the downturn in spending during the double-dip…
1
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
- Consider the basic Keynesian-cross model (without government or foreign sectors), where themarginal propensity to consume out of each dollar of disposable income is 60 cents. Initially,autonomous consumption is $350 billion, and Planned investment is $150 billion. Then, animalspirits soar and businesses increase Planned investment to $200 billion. What is the change inequilibrium output (to the closest billion)?INFLATION RATE LRAS AD SRAS REAL GOP GROWTH RATE Suppose a change in fiscal policy causes the AD curve to shift from AD₁ to AD2, as shown above. Which response below would most likely cause that shift? A fall in taxes OR a rise in government spending. A rise in taxes OR a rise in government spending. A rise in taxes OR a fall in government spending. A fall in taxes OR a fall in government spending.Consider a keynesian macromodel Y=(C0+G+I) / (1-c) where C0 is autonomus consumption, G is government consumption expenditure, I is investment expenditure, c is the marginal propensity to consume. In this model, if lthere is an increse in both labor productivity and the marginal propensity to consume while autonomus expenditures remain unchanged, what will happen to the level of employment? a. can't say for sure b. decreses c. stays the same d. increases
- Consider an economy called Xanadu for which desired aggregate consumptiondepends on income, Y. and the real interest rate, r, according toCd =100+0.7Y - 200r.Xanadu's GDP is Y = 1000 and government spending on goods and services is G=180. Xanadu's desired future capital stock is given byK* = 140 - 100ucwhere luCdenotes the user-cost of capital. The price of capital is PK =2, thephysical depreciation rate is d =0.1 and the existing capital stock is K0= 50. Trapital stock between any period t and the following period t+1 evolves accordng toKt+1 = It+(1-d)Kt where It the level of investment. Assume throughout that net factor payments from abroad (NFP) is equal to zero.Suppose instead that Xanadu is a small open economy facing a world interest rate of 1%. It follows that Xanadu's current account position is equal toA) -16B) -51C) -6D) -8Could you do C and D A country has an initial real output of $162 Billion. What would the final output be expected to be if:a. The government spends $15 billion on infrastructure and the MPC of the country is 0.35b. The government reduces taxes by $3.5 billion and the MPW of the country is 0.75c. The government makes no changes to taxes or spending.d. The government decreases spending nationwide by $9 billion in a country where people are likely to withdraw 60 cents on every new dollar of income.suppose you are given a consumption, investment and government expenditure functions as C= 700 + 0.6Y , I= 360+ 0.3Y and G= 440 respectively in the initial year. additionally, suppose that last year's aggregate demand determines this year's production. if autonomous investment rises from 360 to 400 then what will be the national income in three years ?
- I have to analyze, using the IS-LM model, the macroeconomiceffects of an increase in savings in the short term and its implications for long-term growth. Specifically, I have to suppose that households (consumers) lose confidence and start saving more for any level of disposable income. Can you plase answer the following question (using graphs too): In terms of total savings and, therefore, of potential long-term growth, is a flat LM curve or a positive sloping LM curve better?I have to analyze, using the IS-LM model, the macroeconomic effects of an increase in savings in the short term and its implications for long-term growth. Specifically, I have to suppose that households (consumers) lose confidence and start saving more for any level of disposable income. Can you please answer the following question (using graphs too): How does the loss of consumer confidence affect production, investment andprivate savings? Does the attempt to save more necessarily lead to increased savings? Or will it lead to a decrease in savings?Consider a macroeconomy where the current population is 800 thousand people. Gross domestic private investment is constant $2500 million while consumer expenditure is described by the equation: C = 580 +0.8DI. The government is fairly active, with a total expenditure of $2000 million andnet taxes of $2550 million. Further investigation of the macroeconomy reveals that imports are constant at $3000 million while exports are constant at $2500 million. Currently, the overall price level (GDP deflator) is 118 and the potental GDP level is $13.5 billion.(Question4 of 7)Now, consider that the government decreases taxes by 7.5%. While the change had a direct impact on the economy, other market conditions led to an unanticipated change in the economy. Specifically, imports decrease by 7.5%. At the same time, given the birth rate, mortality rate, and net migration, the economy experienced a 0% change in its population.1. As a result of these events, what is the current equilibrium level of GDP?…
- A) Identify - and justify with macroeconomic arguments the long-term adjustments (i.e., the possible displacements of the 3 curves identified on the graph) that can be expected, all things being equal. b) Identify - and justify with macroeconomic arguments what are the implications for: i. the inflation rate, ii. the real growth rate, iii.the unemployment rate, and iv. the output gap (i.e. the difference between realized GDP and full capacity GDP)This is not writing assignment, But its a homework given by my school. Pls answer all parts of this question in simple words. a.) How will COVID impact China’s GDP and consumption? b.) How did COVID affect manufacturing production, especially in China? c.) How would this affect the global economy and balance of trade?Given the marginal propensity to consume = .75 and marginal propensity to import = .15, then we should expect (ceteris paribus) that an autonomous reduction of net exports = - $100 will Group of answer choices reduce GDP by $400. reduce GDP by $50. not affect the level of GDP. reduce GDP by $100. reduce GDP by $250.