,000 0,000 45° 10,000 11,000 12,000 13,000 14,000 15,000 16,000 Real GDP (billions of dollars) Instructions: Enter your answer as a whole number. b. Looking at your graph, determine whether equilibrium GDP has increased, decreased, or stayed the same given the $500 increase in government purchases. Equilibrium GDP has (Click to select) by $ Shown below is the aggregate expenditures model composed of consumption and investment spending for a closed economy. a. Show the effect of a $500 increase in government spending. Instructions: Click and drag on the expenditure line to move it to the correct position given the $500 increase in government spending. A Closed Economy Aggregate expenditures (billions of dollars) 16,000 15,000 14,000 C+I+G 13,000 A 12,000 11,000

The diagram below shows the consumption schedule for a private closed economy. The level of planned investment is $6 billion. a. Using the diagram, draw the aggregate expenditures schedule for this economy and then identify equilibrium GDP. Instructions: (1) Use the tool provided 'C + I'to draw the aggregate expenditures schedule for this economy. (2) Use the tool provided 'Equilibrium' to identify the new equilibrium GDP. Aggregate Expenditures Schedule 50 Tools 40 C+1 Equilibrium 30 20 10 10 20 30 40 50 Real GDP (billions of dollars) Instructions: In part b, enter your answer as a whole number. In part c, round your answer to 1 decimal place. b. What is the equilibrium GDP for this country? billion c. What is the marginal propensity to consume for this country? Aggregate expenditures (billions of dollars) 18

Problems 3. Draw the graph and label correctly Assume a simple closed economy, with an mpc equal to 0.75. The government has passed a balanced budget amendment. The economy goes into a recession, so the government increases government spending by 40 million to try to expand the economy. a. Calculate the change in output (AY) from the increase in government spending (AG). llion. Calculate W Quiz/

The table shows real GDP, Y, consumption expenditure, C, investment, /, government expenditure on goods and services, G, exports, X, imports, M, and aggregate planned expenditure, AE, in trillions of dollars. Taxes are constant. If government expenditure increases to $1.2 trillion but other things remain the same, what is equilibrium expenditure and what is the multiplier? >>> Answer to 1 decimal place. The new equilibrium expenditure is $ trillion. Planned expenditure Y C G X M AE 0 0.4 1.4 0.4 1.0 0.0 3.2 2 2.0 1.4 0.4 1.0 0.4 T 4 3.6 1.4 0.4 1.0 0.8 5.6 6 5.2 1.4 0.4 1.0 S 6.8 8 6.8 R 0.4 1.0 1.6 8.0 10 Q 1.4 0.4 1.0 2.0 9.2 12 10.0 1.4 0.4 1.0 2.4 10.4

how do we connect the MPS, MPC, spending multiplier and total change?

3@   An economy has neither imports nor income taxes. The MPC is 0.75 and the real GDP is $120 billion. The government increases expenditures by $4 billion. The multiplier is _____ and the change in real GDP from the increase in government expenditures is _____ billion.

When the MPC increases: a. the government spending multiplier stays the same b. the government spending multiplier decreases c. the government spending multiplier also increases d. the government spending multiplier could increase or decreases e.depending on whether government spending is increasing or decreasing

4. A country’s consumer spending is defined by the following equation:Consumer spending = 365 + 0.75 (Disposable Income)a. Draw a diagram to represent this equation. b. Assuming no government, what will the Marginal Propensity to Save (MPS) in this country.c. What will be Consumer spending if disposable income in this country is 1000?  d. If suddenly this country’s wealth increases, how do you think the equation might change.Also show it in a diagram.

Potential GDP 450 C+l+G+X-IM) F T 4,000 5,000 6,000 Real GDP (billions of dollars per year) In Figure 11-1, the slope of the expenditures schedule is 0.75, and the govemment wishes to achieve full employment. It should cut spending by 1,000. increase spending by 250. cut taxes by 1,000. cut taxes by 250. increase spending by 1,000. Real Expenditure

d H-50 Home BIU ab Insert Page Layout Online class3 (1).docx - Microsoft Word 10 abc X₂ x Aa A A Font References Mailings Review View CM 24 Paragraph Picture Tools Format AaBbCcDdi AaBbCc AaBbCc Emphasis Heading 1 Heading 2 Styles 10 CA A Change Editing Styles EXERCISES FOR CHAPTER 6 Exercise 6.1 Suppose that in an economy with no government the aggregate expenditure function is: AE = 50+0.75Y. (a) Draw a diagram showing the aggregate expenditure function, and indicate the level of planned expenditure when income is 150. (b) In this same diagram, show what would happen to aggregate expenditure if income increased to 200. (c) What are the levels of autonomous expenditure and induced expenditure at income levels of 150 and 200. (d) In this same diagram show what would happen if autonomous expenditure increased by 20. Exercise 6.2 Suppose the media predicts a deep and persistent economic recession. Households expect their future income and employment prospects to fall. They cut back on…