In a simple economy (assume there are no taxes, thus Y is disposable income), the consumption function is: C=100+0.75Y. Investment is equal to 300. In this economy, equilibrium GDP is $ (Round your answer to the nearest dollar.) 1.) Using the point drawing tool, on the graph to the right, indicate the real GDP point that you found above. Label the point 'E'. 2.) Using the line drawing tool, carefully graph the consumption plus investment line. Properly label your line. Carefully follow the instructions above, and only draw the required objects. Planned Real Consumption and Investment 2800- 2400+ 2000- 1600- 1200- 800- 400- 0 0 400 800 1200 1600 2000 2400 2800 Real GDP per Year Q Q

In a simple economy (assume there are no taxes, thus Y is disposable income), the consumption function is: C=100+0.75Y. Investment is equal to 300. In this economy, equilibrium GDP is $ (Round your answer to the nearest dollar.) 1.) Using the point drawing tool, on the graph to the right, indicate the real GDP point that you found above. Label the point 'E'. 2.) Using the line drawing tool, carefully graph the consumption plus investment line. Properly label your line. Carefully follow the instructions above, and only draw the required objects. Planned Real Consumption and Investment 2800- 2400+ 2000- 1600- 1200- 800- 400- 0 0 400 800 1200 1600 2000 2400 2800 Real GDP per Year Q Q

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter9: Demand-side Equilibrium: Unemployment Or Inflation?

Section: Chapter Questions

Problem 4TY

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Answer the following questions, which relate to the aggregate expenditures model:a. If Ca is $100, Ig is $50, Xn is -$10, and G is $30, what is the economy’s equilibrium GDP?b. If real GDP in an economy is currently $200, Ca is $100, Ig is $50, Xn is -$10, and G is $30, will the economy’s real GDP rise, fall, or stay the same?c. Suppose that full-employment (and full-capacity) output in an economy is $200. If Ca is $150, Ig is $50, Xn is -$10, and G is $30, what will be the macroeconomic result?
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In step 4, when answering question c, isn't Y= AE = C+I+G? where C is consumption (which we have the formula for), I is investment and G is government spending. When we insert the consumption formula in to the equation, then I+G will be 680? Is this not so?
A $300 million decrease in investment spending will increase real GDP by more than $300 million. Is this a true statement? What is the relationship between investment spending and the GDP? I think that investment spending goes directly into the economy so I believe the answer to be true. But I am not sure.
Consider an economy in which investment is $200, government purchases are $500, net exports are $30, and the price level is fixed. Taxes vary with income, and as a result, the consumption schedule looks like that shown in the following table. Fill in the missing values. Graph the aggregate expenditure graph using the above data. This is the graph with Aggregate Expenditures on the Y axis and Real GDP on the x axis. Start with a forty five degree line. Suppose that full employment comes at GDP=$1,480. Is the economy in an inflationary or recessionary gap? What action would you take to close the gap?
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From the information below calculate aggregate demand; Consumption (C) = $200 + 0.6Y Investment (I) = $300 Government (G) = $100 Net Export (NX) = $50 Which one of the following statements about Consumption and Aggregate Demand is CORRECT when the economy achieves equilibrium GDP? a. One is 350 greater than the other b. One comprises the other c. They are valued at $1025 and $1375, respectively d. They are valued at $1375 and $1025, respectively e. They are both the same
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