Solve question no. 2 which is shaded.Hand written solutions are strictly prohibited Since an economy's aggregate output measured by real GDP also represents the aggregate income received by the resources of production within theeconomy, the decrease in aggregate demand you found equals the decrease in aggregate income. The effect of this decline in aggregate income isbillion.in total saving of $As personal consumption falls by $1 billion, the economy reaches a new equilibrium with an aggregate output of $The total amount of savingTrue or False: This is an example of the paradox of thrift.O TrueFalsebillion in the short run.solthis 7. Paradox of thriftConsider a hypothetical closed economy in which there are no income taxes. If households spend $0.80 of each additional dollar they earn and savethe remainder, the expenditure multiplier for this economy isThe following graph shows the initial aggregate demand (AD) and short-run aggregate supply (SRAS) curves of this economy.Suppose that the economy is currently in a recession. Business firms are pessimistic about the future and do not respond to a fall in interest rates. Inaddition, all households are pessimistic about job prospects and desire to consume less and save more at all levels of income. As a result, personalconsumption in this economy decreases by $1 billion.The reduction in personal consumption will lead to a decrease in aggregate demand by $Shift either the AD curve or the SRAS curve, or both, to show the new aggregate demand curve after the full impact of the multiplier process of thereduction in personal consumption has taken place.PRICE LEVEL (Billions of dollars)1009080706050403020100012374 5 6REAL GDP (Index numbers)SRASAD89104 4ADSRASbillion.?

Expenditure multiplier is the ratio between the change in the real GDP & the change in the govt.…

Since an economy's aggregate output measured by real GDP also represents the aggregate income received by the resources of production within the economy, the decrease in aggregate demand you found equals the decrease in aggregate income. The effect of this decline in aggregate income is billion. in total saving of $ As personal consumption falls by $1 billion, the economy reaches a new equilibrium with an aggregate output of $ The total amount of saving True or False: This is an example of the paradox of thrift. True False billion in the short run. sol e ke

Since an economy's aggregate output measured by real GDP also represents the aggregate income received by the resources of production within the economy, the decrease in aggregate demand you found equals the decrease in aggregate income. The effect of this decline in aggregate income is billion. in total saving of $ As personal consumption falls by $1 billion, the economy reaches a new equilibrium with an aggregate output of $ The total amount of saving True or False: This is an example of the paradox of thrift. True False billion in the short run. sol e ke

Economics For Today

10th Edition

ISBN:9781337613040

Author:Tucker

Publisher:Tucker

Chapter18: The Keynesian Model

Section: Chapter Questions

Problem 9SQP

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The following table shows data for the economy before the decrease in saving. Suppose that the decrease in saving causes consumption to rise from $280 million to $320 million. Assume Say's law holds in this economy. Fill in the data for the economy after the decrease in saving. Before Saving Decrease After Saving Decrease Consumption (C) $280 million $320 million Investment (I) $200 million $ million Government Purchases (G) $250 million $ million Exports (EX) $500 million $500 million Imports (IM) $300 million $300 million As a result of the decrease in saving, total expenditures will .
What would be the level of saving if the real GDP (Y) were at $7 trillion? what is the level of desired investment at this level? What forces are at work at a real GDP of $7 trillion? What will be the equilibrium level of real GDP?
1. Show that equilibruim level of income is at a point where consumption plus investment schedules intersect the 45 degree line. 2. Suppose the level of autonomous investment in an economy is K200,000 and the consumption function is given below as c = 80+0.8Y, what will be the equilibrium level of income. 4.if MPcC is 0.8, what will be the increase in the level of income if investment is increased to K400,000. 5. What increase in investment is needed to raise the income by K4000, if MPC is 0.75? How much will be the increase in consumption and saving due to this increase in income. 3. Given the consumption level C= 50 + 75Y, if we assume autonomous investment is K200,000 at what level of income will savings become equal to investment?
Consider an economy described by the following equations: Y = C+I+G Y = 5000 G = 1000 T = 1000 C = 250 + 0.75(Y-T) I = 1000 - 50r In this economy, compute private saving, public saving, and national saving. Find equilibrium interest rate. Now suppose that G rises to 1250. Compute private saving, public saving, and national saving. Find the new equilibrium interest rate. Using your knowledge of Macroeconomics and intuition explain the reason why increasing government expenditure causes interest rate to rise? If the government wants to increase the amount of savings in the economy, how should it alter government spending? What effect will this action have on the interest rate in the economy?
ADVANCED ANALYSIS Assume that the consumption schedule for a private closed economy is such that consumption is: C = 100 + 0.75Y Assume further that planned investment Ig is independent of the level of real GDP and constant at Ig = 50. Recall also that, in equilibrium, the real output produced (Y) is equal to aggregate expenditures: Y = C + Ig Instructions: Enter your answers as whole numbers.a. Calculate the equilibrium level of income or real GDP for this economy. Equilibrium GDP (Y) = $ . b. What happens to equilibrium GDP if Ig changes to 60? Equilibrium GDP (Y) = $ . What does this outcome reveal about the size of the spending multiplier? Spending multiplier = .
1) Following is information for the economy of Sparkle. All units are milliondollars. Their autonomous consumption is $700, and the marginal propensity to consume is 0.8.Investment spending is constant at $380, and government expenditure is constant at $300.Exports are constant at $500, and imports are constant at $800. Net taxes are constant at $100.Calculate and state your answers for the following questions.a) What is the value of consumption in this economy when the real GDP is $1100?b) What is the value of autonomous aggregate planned expenditure i.e. AE0?c) What is the value of equilibrium aggregate expenditure for this economy?d) What is the value of unplanned changes in the inventory investment when real GDP is$4000?e) What is the size of the multiplier in this economy?f) If investment spending increases by $50, what would be the value of the change in theequilibrium real GDP?