I am stuck on solving the attached image and i need help? If investment decreases by $70 billion and the economy's MPC is 0.5, the aggregate demand curve will shiftMultiple Cholceleftward by $140 billion at each price level.rightward by $70 billion at each price level.O rightward by $140 billion at each price level.leftward by $35 billion at each price level.

Aggregate demand refers to the overall demand for goods and services in an economy. The aggregate…

If investment decreases by $70 billion and the economy's MPC is 0.5, the aggregate demand curve will shift Multiple Cholce O leftward by $140 billion at each price level. rightward by $70 billion at each price level. rightward by $140 billion at each price level. O leftward by $35 billion at each price level.

If investment decreases by $70 billion and the economy's MPC is 0.5, the aggregate demand curve will shift Multiple Cholce O leftward by $140 billion at each price level. rightward by $70 billion at each price level. rightward by $140 billion at each price level. O leftward by $35 billion at each price level.

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter11: Managing Aggregate Demand: Fiscal Policy

Section: Chapter Questions

Problem 2TY

See similar textbooks

Similar questions

If investment decreases by $20 billion and the economy's MPC is .5, the aggregate demand curve will shift: Select one: a. leftward by $40 billion at each price level. b. rightward by $20 billion at each price level. c. rightward by $40 billion at each price level. d. leftward by $20 billion at each price level.
18 - : If aggregate demand increases in an economy while aggregate demand is constant in the short run, which of the following statements is correct for the new equilibrium point?A) price decreases and national income increasesB) price rises national income risesC) price increases and national income does not changeD) price goes up and national income goes downE) price decreases and national income decreases.19 - : In which of the following expressions is the equation of change given correctly?A) MV=VK B) MT=PV C) MV=PT D) MP=VY E) MV=P
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 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?
If house holds decide to save a larger portion of thier income, what effect would this have on the output, employment and price level in the short run
If investment increases by $15 billion and the economy’s MPC is 0.8 the aggregate demand curve will shift A.Leftward by $75 billion at school price level B .Leftward by $30 billion at each price level C. Rightward by $15 billion at each price level D. Rightward by $75 billion at each price level
Assume that (a)the price level is flexible upward but not downward and (b) the economy iscurrently operating at its full-employment output. Other things equal, how willeach of the following affect the equilibrium price level and equilibrium levelof real output in the short run?· An increase in aggregate demand.· A decrease in aggregate supply, with no change in aggregatedemand.· Equal increases in aggregate demand and aggregate supply.· A decrease in aggregate demand.· An increase in aggregate demand that exceeds an increase inaggregate supply.
in a closed economy with no government, where aggregate demand is determinedby autonomous consumption, investment (which is independent of output), and themarginal propensity to consume.a) Given that autonomous consumption is 20, investment is also 20, and the marginalpropensity to consume is 0.6, write out an equation for aggregate demand (AD) in thiseconomy. b) Given this aggregate demand equation, and the equilibrium equation Y = AD, usealgebra to find the equilibrium level of Y. c) Draw a diagram with output (Y) on the x-axis and aggregate demand (AD) on the yaxis. Draw two lines on this diagram: (i) Y = AD, and (ii) the aggregate demandfunction from part (a). Label the intercept of the AD line, and the point where the twolines intersect, with numerical values. (3 marks)d) Suppose that the marginal propensity to consume falls from 0.6 to 0.5. What wouldthe new equilibrium level of Y be? Illustrate your answer in the diagram you drew forpart (c). (2 marks)e) Calculate the value of…
Autonomous Consumption R535mMarginal propensity to consume is 0.75Investment Spending R322mGovernment Spending R300mImports R175m + 0.08YExports R283mTaxes = 0.1YFull employment level of output is R3 483m Calculate the value of induced imports in thiseconomy, given the equilibrium level of output.
16. Consider a closed economy with demand for goods as follows: Yd = C+I+G C= 200+0.80 ( Y-T) I= 600 G=1000 T=1000 a. What is “autonomous expenditure” ( Eo) for this economy? hint: the Keynesian cross model of income determination.
Assume an economy operates in the intermediaterange of its aggregate supply curve. State thedirection of shift for the aggregate demandor aggregate supply curve for each of thefollowing changes in conditions. What is theeffect on the price level? On real GDP? Onemployment?a. The price of crude oil rises significantly.b. Spending on national defense doubles.c. The costs of imported goods increase.d. An improvement in technology raises laborproductivity.
Considering the growing potential threat of terrorists’ attacks worldwide, the President of an economyapproved a fiscal spending of $24 billion to upgrade its national defense. a. Starting in a long-run equilibrium, draw a well-labelled AD-SRAS-LRAS diagram for the economy. b. Use the same diagram in part (a) to show the SR effect on the economy’s GDP (Y), the price level, andunemployment when the federal government increases its spending on national defense. c. To stabilize the price level and the economy’s GDP, what kind of monetary policy should the economyadopt? Illustrate your answer in the same diagram in (a).
Refer to the following figure 1. For this economy, if the actual price level exceeds theexpected price level, how much output will the economyproduce in the short-run? A)$17 trillionB)$17.2 trillionC)$16.7 trillionD) Both A and C.2. Given the situation in part (a), this economy wouldexperience A) a recessionary gap of $0.3 trillionB) an expansionary gap of $0.2 trillionC) neither a recessionary gap nor an expansionary gap.D) an expansionary gap of $17.2 trillion. 3. Given the situation in part (a), in this economy (circlethe letter representing the right answer below)A) the actual rate of unemployment would be less than thenatural rate of unemployment.B) the actual rate of unemployment would be above the naturalrate of unemployment.C) the actual rate of unemployment would be equal to thenatural rate of unemployment.D)none of the above.4. In this economy, given the situation in part (a), in thelong-run (circle the letter representing the right answerbelow)A) the nominal wage…