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A: Answer -
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The circular flow of income forms the basis for all models of the macro-economy, and understanding the circular flow process is key to explaining the determination of
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- what is the difference between permanent income and transitory income increases related to the keynesian crossExplain the components of AD, and how it relates to the “Product Market” portion of the simple circular flow as presented in class. Differentiate the AD and product market from the perspective of the “Factor Market” and the income approach of measuring GDP.Consider a simple macro model with a constant price level and demand determined output. The equations of the model are c=90+0.36y I=155 G=290’T=125 and IM=0.06Y. A national income of 1100 results in desired aggregate expenditure of…
- With the aid of an appropriate diagram show how a fall and a rise in aggregate leakage function compositely impact on the equilibrium national incomeOver a given year, nominal GDP increased by about 2.5%. Over that year, the GDP deflator decreased by about 4%. From this information (and using our Aggregate Supply and Demand framework for analysis), we infer that over this year, Group of answer choices a) real GDP increased, and we had a decrease in Aggregate Demand. b) real GDP decreased, and we had a decrease in Aggregate Supply. c) real GDP increased, and we had an increase in Aggregate Demand. d) real GDP increased, and we had an increase in Aggregate Supply. e) real GDP decreased, and we had an increase in Aggregate Demand.Which components of aggregate expenditure do not directly depend on current income?
- If we plot the accounting definiton Y = C +1 and the consumption function C=cY on axes labelled C and Y, an increase in the popensity to consume will lead to: a. a change in the slope of the national accounting definition b. a change in the slope of the consumption function c. a change in the intercept of the national accounting definition d. a change in the intercept of the consumption functionAssume 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%.Please solve using a national income accounting: An increase in disposable income will increase in consumption or savings An increase in consumption or savings will increase in disposable income
- The following are national income account data for a hypothetical economy in billions of dollars: gross private domestic investment ($320), imports ($35), exports ($22), personal consumption expenditures $2460, and government purchases ($470). What is the Net Export in this economy?Consider the “circular flow” diagram for our economy. Explain what each of its components mean and how that detailed model of “incomes” and “expenditures” provides a foundation for economic theory?What is the relationship of the GDP deflator to real GDP? To make comparisons across time or across borders, one must use the notion of a GDP deflator to convert nominal GDP into real GDP for comparisons. Nominal variables are in current dollars and have price level changes such as inflation and deflation included in them. Real variables are in constant dollars due to the factoring out of price level changes using a base year and a deflator. What is the current nominal GDP for the US economy? What is the current real GDP for the US economy?
