Q: If investment increases by $15 billion and the economy’s MPC is 0.8 the aggregate demand curve will…
A: Increase in investment= $15 billion MPC= 0.8 Multiplier=1(1-MPC) =1(1-0.8)…
Q: Refer to the following figure when answering the following questions. Figure 14.2: IS-MP Curve R MPC…
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A: Answer to the question is as follows:
Q: Consider a hypothetical economy in which households spend $0.75 of each additional dollar they earn…
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Q: If the short-run IS–LM equilibrium occurs at a level of income above the natural level of output,…
A: If the short-run IS–LM equilibrium occurs at a level of income above the natural level of output,…
Q: Suppose the economy's short-run aggregate supply (AS) curve is given by the following equation:…
A: The aggregate supply equation is given as Quantity supplied = Natural level of output + α(Actual…
Q: Suppose an economy is at the short run equilibrium which its current output level called Y1, is…
A: The economy is at the short run equilibrium at income Y1 and the price level P1. At this point,…
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Q: Suppose that the components of planned spending in an economy are C=500 +0.8(Y-T), I=1500, G=2000,…
A: Short run refers to the time period which does not allow some of the factors of production change…
Q: Starting with long-run equilibrium, illustrate with a figure and explain the effect of a decrease in…
A: In economics, the long run is a hypothetical idea wherein all markets are in harmony, and all costs…
Q: If investment increases by $15 billion and the economy's MPC is 0.8, the aggregate demand curve will…
A: rightward by $75 billion at each price level. Explanation: As we know Investment multiplier is…
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A: Output gap is the difference between potential output and actual equilibrium output.
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A: NOTE: Since you have asked multiple questions we will be answering only the first one, if you need…
Q: 5. Keynesian three-part aggregate supply The following graph shows the three-part Keynesian…
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Q: Suppose the economy is self-regulating, the price level is 132, the quantity demanded of Real GDP is…
A: It can be said that the economy is in short-run equilibrium as the aggregate demand (AD) is equal to…
Q: Suppose an economy is characterised by the following: C = 160 + 0.6 (400 - T) | = 150 G = 150 T =…
A: C=160+0.6(400-T)I=150G=150T=100 (i) For equilibrium output…
Q: The following graph shows the aggregate demand (AD) and aggregate supply (AS) curves for the United…
A: Aggregate Demand has four componenets. Namely, 1.Consumption 2.Investment 3.Government Spending…
Q: Suppose the economy is self-regulating, the price level is 132, the quantity demanded of Real GDP is…
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Q: By how much would the $90 billion 2008 tax rebates have shifted AD if the MPC was 0.95? billion
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Q: Suppose the AS curve is P = 4 Q + 10 and the AD curve is P = 100-4 Q. What is the equilibrium…
A: Answer to the question is as follows:
Q: Instructions: Enter your answer as a whole number. If you are entering a negative number include a…
A: Aggregate demand refers to the cumulative spending on goods and services produced in the domestic…
Q: Which of the following is implied by a rightward shift in the economy's AS curve? There is a demand…
A: Aggregate supply (AS): - It is the total supply of goods and services in an economy at a particular…
Q: What is the change in aggregate demand if the government increases taxes by $86,000 and people tend…
A: Given information, Change in taxes= $86,000 MPC= $0.84~0.84 To find: change in aggregate demand
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A:
Q: %3D
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Q: The French economist Jean-Baptiste Say trans- formed the equality of total output and total…
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A: Given : Cobb-Douglas type aggregate production function - Y=KaLb
Q: If the MPC in an economy is 0.75, government could shift the aggregate demand curve leftward by $30…
A: MPC= Percentage of new income that is spent on consumption rather than saving
Q: Instructions: Enter your answer as a whole number. If you are entering a negative number include a…
A: The recession means that the economy would result in the output which is less than the long run…
Q: One reason why there may be long-run increasing marginal returns to investment is that... a.…
A: Investment refers to the process of saving and putting in a certain sum of money into a process. It…
Q: According to Say's law, aggregate demand is always equal to aggregate supply. O True O False
A: Aggregate demand is a macroeconomic phrase that refers to the total demand for products and services…
Q: Consider a hypothetical economy in which households spend $0.50 of each additional dollar they earn…
A: Given Marginal propensity to consume = 0.50 Marginal propensity to save = 0.50 Increase in…
Q: Suppose that in 2008, Sanaton’s government increases taxes. Show how this event will change…
A: If the government increases taxes, the supply would decrease and the SRAS would shift leftwards. It…
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Q: Consider the economy described by the following equations: C = 1,600 + 0.9 (Y – T) I p = 800 G =…
A: C = 1,600 + 0.9 (Y – T) I p = 800 G = 1,600 NX = 200 T = 1,600 Y* = 29,000
What effect will an increase in taxes have on the equilibrium level of output when the IS curve shift to the right
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- Suppose an economy is at the short run equilibrium which its current output level called Y1, is below the full employment output level called Yf. If the government does nothing, discuss how the economy restores its long run equilibrium level of output?The French economist Jean-Baptiste Say trans- formed the equality of total output and total spending into a law that can be expressed asa. unemployment is not possible in the short run.b. demand and supply are never equal.c. supply creates its own demand.d. demand creates its own supply.One reason why there may be long-run increasing marginal returns to investment is that... a. Initial investment shifts the the aggregate demand curve to the left, making further investment less costly. b. Initial investment shifts the the investment demand curve to the left, making further investment less costly. c. As further investment takes place, the economy moves down to the right along the marginal product curve. d. As further investment takes place, the economy moves up to the left along the marginal product curv. e. The investment costs to "followers" are lower than those for "pioneers."
- The following graph shows a hypothetical economy in long-run equilibrium at an expected price level of 120 and a natural output level of $600 billion. Suppose the government increases spending on building and repairing highways, bridges, and ports.Complete the following table by matching the macroeconomic assumptions about aggregate supply to the appropriate school of thought. Assumption Classical Keynesian Only an increase in aggregate demand can move an economy out of a recession and back to potential real GDP quickly. Product prices and wages tend to be inflexible. The following graph shows the aggregate demand (ADAD) and aggregate supply (ASAS) curves for a hypothetical economy that is currently operating below its full-employment output level. That is, the economy is currently in a recession. The aggregate supply curve (ASAS) in this diagram is consistent with the view of aggregate supply. According to this viewpoint, the government should spending in response to the recession. Shift the appropriate curve on the graph to illustrate the impact of this change in government spending. ADASPRICE LEVELREAL GDP (Trillions of dollars)AD AS The prescribed…The consumption function macroeconomics is often written as C= a + b(Y-T) where b expresses: a. The marginal savings rate b. The marginal propensity to consume c. The interest rate that maximizes consumption d. The relationship between tax and consumption
- . Suppose the economy is self-regulating, the price level is 132, the quantity demanded of Real GDP is 4 trillion, the quantity supplied of Real GDP in the short run is 3.9 trillion, and the quantity supplied of Real GDP in the long run is 4.3 trillion. Is the economy in short-run equilibrium? Will the price level in long-run equilibrium be greater than, less than, or equal to 132? Show the relevant graph and explain answers.Suppose that the components of planned spending in an economy are C=500 +0.8(Y-T), I=1500, G=2000, X=0, T=0.25Y, where t is the fraction of income paid in taxes (the tax rate). As we will see in this problem, a tax system of this sort serves as an automatic stabiliser, because taxes collected automatically fall when incomes fall.a)Find a short-run equilibrium output in this economy. b)Calculate the multiplier. c)Explain how reducing the size of the multiplier helps to stabilise the economy, holding constant the typical size of fluctuations in the components of exogenous expenditure.You will draw four separate Aggregate-Demand/Aggregate-Supply graphs. Each graph will have one curve shift. Be sure to label axis, curves, and equilibrium. Change colors to show the shift and label the new equilibrium. Draw an ADAS graph at equilibrium. Suppose the interest rates on loans on capital goods decrease. Which curve will shift? Draw the new equilibrium. Draw an ADAS graph at equilibrium. Suppose there is an decrease in government spending. Which curve will shift? Draw the new equilibrium. Draw an ADAS graph at equilibrium. Suppose the income of our trading partners increase. Which curve will shift? Draw the new equilibrium. Draw an ADAS graph at equilibrium. Suppose there is widespread concern that prices will continue to rise in the future. Which curve will shift? Draw the new equilibrium.