Answered: Explain the effect of national income…

Explain the effect of national income when price is flexible due to the following situation: a) An increase in the money supply. b) A reduction in government spending. (explain with graphs)

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter29: Interest, Rent, And Profit

Section: Chapter Questions

Problem 5QP

See similar textbooks

Related questions

Q: I. Select the most correct response to these multiple-choice questions. 1. To make the income…

A: "Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: Equilibrium GDP( Y) 5 points Disposable Income (Yo) 5 points 1. 2. Consumption Spending (C) 5 points…

Q: Which of the following is NOT a problem associated with using GDP as a measure of economic…

A: The entities in an economy are of various types, such as the households, the investors, firms,…

Q: A person’s disposable income decreases, and his personal income remains unchanged. This is because…

A: Unemployment refers to the situation where an individual who is willing to work and is actively…

Q: During a recession the economy experiencesa. rising employment and income.b. rising employment and…

A: Recession is a phase of economy where there is a fall in economic activity. Recession is generally…

Q: The GDP deflator is... The difference between Nominal and Real GDP. The inflation rate used to…

A: The economies around the globe are involved in various types of financial, and economic activities.…

Q: 6. Discuss the following statement: "Real GDP has decreased for two quarters in a row; we…

A: The gross domestic product of an economy is generally calculated by using the expenditure approach…

Q: Explain, with the aid of both AD/AS and Keynesian Cross diagrams, the decrease in the deflationary…

A: answer is in image

Q: If the marginal propensity to save is 0.4 (or 40%) and the government plans to spend $4,000 in the…

A: Given MPS = 0.4 Increase in government spending = 4000 $ Expenditure multiplier = 1 / MPS = 2.5

Q: The shortfall between actual real GDP and potential GDP a. decreases as the unemployment rate rises.…

A: Economics is a branch of social science that describes and analyzes the behaviors and decisions…

Q: The shortfall between actual real GDP and potential GDP a decreases as the unemployment rate rises…

A: The percentage of non-employed workers in labor force is called unemployment rate.

Q: In the circular flow of income O Households demand goods and services that are supplied by firms,…

A: In the circular flow of income households demand goods and services that are supplied by firms…

Q: A change in a fixed tax will cause the consumption schedule to a. become steeper. b. become flatter.…

A: Consumption function is the sum of consumption that is autonomous and the consumption that depends…

Q: Fully explain and illustrate the circular flow of income model as well as highlight the causes and…

A: A model that shows the way through which money, goods and services change hands in an economy is…

Q: Which of the following best characterizes the circular flow of income? Businesses buy resources from…

A: The circular flow of income model depicts how income flows through the economy between economic…

Q: The US economy continued its robust recovery during the second quarter in 2021, allaying fears the…

A: Aggregate demand and aggregate supply model is given in macro economics for the equilibrium output ,…

Q: The Break-even point also becomes the national income equilibrium point when: Saving = zero.…

A: Actually in easy word we can say that the break even point denotes the amount of the actual revenue…

Q: 5 An economic recession means that _______. a. GDP is critically high b. Employment is increasing c.…

A: Economic recession means that when there is sudden decline in the economy.

Q: 1. What is the equation Y= C (Y-T) + I (Y, r+x ) + G telling you about the determination of…

A: Answer -

Q: Compare and contrast the effect of expansion and recession on selected variables like output and…

A: Let us understand some key terms such as - Business cycle aggregate demand, aggregate supply,…

Q: Real GDP Refer to Figure 13-1 above. Ceteris paribus, an increase in personal income taxes would be…

A: The aggregate demand refers to the total demand for all the goods and services produced in an…

Q: Use the information in the table below to answer Q.3.1 to Q.3.3: GDP at market prices R397bn Net…

A: The gross domestic product is the aggregate of values of all final goods and services produced in an…

Q: Which one of the following pairs of points coincide O The Break-even point and the national income…

A: The equilibrium point is the stable state where all the forces are equal, balanced and in stable…

Q: Explain how gross domestic product is calculated using each of the following: the income approach…

A: Gross Domestic Product ( GDP ) refers to the market value of the final goods and services produced…

Q: An economy has the potential to produce $230 billion worth of goods and services. Government…

A: An economy has the potential to produce = $230 billion actuall production = $196 billion

Q: Explain the circular flow between the household sector and firms sector with the financial market.…

A: The circular flow diagram is a visual representation of the economy that demonstrates how cash moves…

Q: A person’s disposable income decreases, and his personal income remains unchanged. This is because…

A: Disposable income of the consumer is that income which consumer have recieve after deduction taxes…

Q: Describe how different parts of the economy may have experienced shifts and changes in supply and…

A: Components that can move the call for bend for labor and merchandise, making an exchange quantity be…

Q: Which of the following are true of an economy operating with a negative GDP gap? Check all that…

A: Gross Domestic Product (GDP at MP): This is the gross market value of all the final commodities…

Q: The difference between nominal GDP and real GDP is that nominal GDP Group of answer choices measures…

A: Nominal GDP is the value of final goods and services at the current year prices. Real GDP is the…

Q: An Inflationary gap is diagnosed when: National Income Equilibrium is less than Full employment.…

A: 1c national income equilibrium is greater then full employment An inflationary gap refers to the…

Q: Which of the following events will lead to a rise in the level of national income in an economy?…

A: Which of the following cases will lead to a rise in the national income in an economy?

Q: If the government increases its expenditure on goods and services and as a result, the money wage…

A: When the governemtn increases the expenditure on goods and service, the agrregate demand in the…

Q: An Inflationary gap is diagnosed when: O National Income Equilibrium is less than Full employment.…

A: Inflationary gap measures the difference between the current level of real GDP and the full…

Q: Inflationary GDP is the amount by which equilibrium real GDP falls short of the full employment…

A: Inflationary gap is said to exists when the aggregate expenditure exceeds the full employment real…

Q: One of the debates surrounding changes in government spending is its effect on the size of national…

A: The aggregate demand and aggregate supply determine the macroeconomic equilbrium in an economy.…

Q: From 2009 to 2019, suppose that GDP increased by 25 percent. Real GDP increased by 15%. The overall…

A: The GDP is the measure of the final and total value of the final goods and services produced within…

Q: Explain the relationship between output and income for both an individual and an entire economy.

A: To understand the relationship beween output and income for an individual and the whole economy, we…

Q: Evaluate the following statement: Even if the prices of a large number of goods and services in the…

A: Gross Domestic Product (GDP) refers to the value of goods and services that are produced inside a…

Q: If nominal GDP rises: real GDP must fall. real GDP must also rise. real GDP may either rise or fall.…

A: Nominal GDP is the value of the basket of all goods and services at the current year prices. So,…

Q: Determine the change in the equilibrium level of consumption (find ΔC) following a decrease in…

A: Assume the economy is experiencing a recessionary hole because of deficient total demand. We can…

Q: You are given the following information about a closed economy with no government: Consumption =…

A: Given, Consumption = 115 + 0.6Y Investment = 550 At equilibrium , Income(Y) = Consumption…

Q: Which of the following statements is true?a. Deflation is an increase in the general level…

A: A is FALSE as deflation is a decrease in the general level of prices. C is FALSE as disinflation is…

Q: 450 Total expenditure Col G(X-M), National income efer to the figure above. If the vertical distance…

A: Inflationary Gap: The inflationary gap arises when actual aggregate demand (AD) is more than the…

Question

Explain the effect of national income when price is flexible due to the following situation:

a) An increase in the money supply.

b) A reduction in government spending.

(explain with graphs)

Definition Definition Monetary value of all goods and services produced in an economy during a financial year. National income also refers to the total income earned by the factors of production during a financial year.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step by step

Solved in 2 steps with 2 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

Assume that nominal income increases by 5% and the price level increases by 3%, which of the following is true? Real GDP must have decreased. The impact on real GDP is indeterminate. The percentage increase in real GDP must exceed the percentage increase in the price level. Real GDP increased by approximately 2%. If the price level increased by 3%, nominal GDP must increase by less than 3%, not by 5%.
An economy has the potential to produce $230 billion worth of goods and services. Government economists estimate the economy is actually producing $196 billion worth of goods and services. What is the GDP gap for this economy.
The government is considering raising the tax rate on labor income. Explain the supply-side effects of such an action and use appropriate graphs to show the directions of change, not exact magnitudes. What will happen to: The supply of labor and why? The demand for labor and why? Equilibrium employment and why? The equilibrium before-tax wage rate and why? The equilibrium after-tax wage rate and why? Potential GDP? Explain your response with specifics and provide examples.
Table 2 shows elements in the national income accounts of an economy. Assume the economy is currently in equilibrium. Elements £ billions Consumption (total) 80 Investment 9 Government Expenditure 6 Imports 15 Exports 8 What is the current equilibrium level of income? What is the level of injections? What is the level of withdrawals? If national income now rises by £22 billion and as a result, the consumption of domestically produced goods rises to £80 billion. Calculate the marginal propensity to consume (MPC)What is the value of the multiplier? What is the value of the multiplier? Comment on the results in part (3) and (4).
Explain why an economy’s output, in essence, is also its income.
Calculate the GDP loss if the actual GDP produced in 2018 was $ 8200b with the unemployment rate of 7.8%. Assume MPC = .75. Calculate the amount of government expenditure and tax cut needed to maintain full employment.
What will be the National income at current price if current price is $300 and the current quantity is 2000 units
If the price of your cell phone contract increases from R 700 to R 900 over a period of one year and your income rises from R15 000 to R15 500 during that same period, your nominal income has… a) Increased, and your real income has increased. b) Increased, but your real income has decreased. c) Decreased, and your real income has decreased. d) Increased, but your real income has remained the same.
Knowing that: The formula for economic impact is I(r)=(A)/1-r ---(i) The formula for impact change is ∆I= I'(r)*∆r ---(ii) The formula for percentage change in spending is g(r)=(r)/1-r ---(iii)
which of the following probably occurred as the U.S. economy experienced increasing real GDP in 1954? Check all that apply A. Consumer spending increased B. Industrial production declined C. Retail sales increased C. Home sales declined
Which of the following would cause the level of income to change by the greatest amount? a. An increase in defense spending of $20 billion. b. An increase in social security payments of $20 billion. c. A reduction in personal income taxes of $20 billion. d. The changes suggested above have equal impacts on the level of income.