Principles of Macroeconomics (12th Edition)
12th Edition
ISBN: 9780134061115
Author: CASE
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 19, Problem 2.2P
Subpart (a):
To determine
To determine the equilibrium income in Country H, the government deficit and the current account balance.
Subpart (b):
To determine
To determine the equilibrium income when the government spending increases and the impact on imports based on the multiplier.
Subpart (c):
To determine
To determine the impact of an import quota on multiplier.
Subpart (d):
To determine
To determine how to attain the current account balance.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
In the IS curve model, the consumer demand can be represented by the following equation:
C = a + B(YT)
where C is consumption, Y is gross domestic product and T are taxes. Which of the following hold(s) ?
Select one or more:
a.The value of ß can be any number greater than 0
b. If household income increases by 1, consumption increases by
C.The value of a can be any number greater than 0
d. a represents consumption required to survive
e. Ca represents consumption for leisure
f. According to the equation, the interest rate can influence consumer demand
In the aggregate expenditures model, all are true except:
a)the price level is shown
b)the equilibrium level of GDP can be determined
c)the relationship between spending and production is presented
d)the actual GDP can be compared to potential GDP
Please write down whether the following statements are true or false, and explain your answer very briefly
A)If actual investment is greater than planned investment, inventories increase more than planned.
B)The marginal propensity to consume is the change in consumption expenditure divided by the percentage change in income.
C)Gross domestic product (GDP) is the value of all goods and services produced in an economy over a particular time period.
D)Monetary policy refers to taxation and spending policies implemented by government.
E)In a simple Keynesian model (with lump-sum taxes and a MPC of 0.8), a tax cut of 20 billion TL will have less of an impact on GDP than an increase in government spending of 10 billion TL.
D)When you take 1000 TL from your savings account and deposit it in your checking account, M2 decreases.
F)An open market purchase of government securities (such as Treasury Bills) by the Central Bank will decrease the money supply and raise the interest rate.…
Chapter 19 Solutions
Principles of Macroeconomics (12th Edition)
Knowledge Booster
Similar questions
- Which one of the following statements is true? In the pre-Keynesian era, prices were assumed not to fully adjust. In the Keynesian model diagram, prices are fixed. GDP is a value of goods and services domestically produced in a country at a given point in time. Say's Law says that demand creates its own production. In the IS/LM model, the interest rate is a function of investment.arrow_forwardA government announces a green budget where they will provide zero interest loans for private sector investment in green electricity production, spend on government investment in rail transport and increase value added tax on all consumer goods with a high carbon footprint. Use the multiplier model (diagram and equations) to explain the likely effect on aggregate demand in the economy. Assume ceteris paribus. In your answer explain how you are interpreting ‘ceteris. paribus.’ when discussing the predictions of the multiplier model.arrow_forwardIn a simple model without government spending or taxation, if C = a +bY where C is consumer spending and Y is GDP which of the following statements are correct? Note that some of these questions require you to have read relevant sections of Core Unit 13. [FOUR correct answers] Select one or more: a. The consumption function implies that if GDP is zero, consumption is zero b. b is known as the average propensity to consume c. If there is an increase in consumers who engage in "consumption smoothing", this will cause an increase in a and a decrease in b d. a is known as the marginal propensity to consume e. b is known as the marginal propensity to consume f. a is the level of consumption when Y is zero g. If consumption-smoothing consumers become more optimistic about the future, a will increase. h. If there are more credit-constrained consumers in the economy, this will cause the marginal propensity to consume, to fallarrow_forward
- IS/LM Model refers to the general equilibrium not macroeconomic equilibrium.arrow_forwardJohn Maynard Keynes created the aggregate expenditures model based primarily on what historical event? Bank panic of 1907. Great Depression. Spectacular economic growth during World War II. The economic expansion of the 1920s. None of the available answers are correct.arrow_forwardFrom a spending model perspective, explain the causes of a recessionarrow_forward
- Consider that the macroeconomy is hit by aftershocks. Exports decrease by $40 billion and imports increase by $200 billion. Modify your macroeconomic model to reflect both these aftershocks 1. At GDP of 7400: 1. Inventories are in surplus by 80 2. Inventories are in shortage by 80 3. Equilibrium is achieved by the macroeconomy according to the Keynesians 4. Inventories are in surplus by 240 2. At GDP of 8200: Inventories are in surplus by 320, Inventories are in shortage by 320, Equilibrium is achieved by the macroeconomy according to the Keynesians, or Inventories are both in surplus and shortage by 240 3. At GDP of 5000: Inventories are in surplus by 80, Inventories are in shortage by 80, Equilibrium is achieved by the macroeconomy according to the Keynesians, or Inventories are in surplus by 240 4. At GDP of 5800, exports are: 5. At GDP of 9000, imports are: 6. At the new equilibrium GDP, the economy is in: 7. The marginal propensity to consume (MPC) for your…arrow_forwardGive typing answer with explanation and conclusion Now let's keep the same model, but instead of having government spending (G) as a given number, I am asking you to calculate the amount of government spending that will make Y = 3000. Remember, the other parameters are as follows: a = 125 MPC = 0.75 I = 275 NE = 100arrow_forwardWhich of the following is not a doctrine of modern macroeconomics? A. Spending drives prices, production, income and employment in the short run B. Lower interest rates are required to increase investment spending during recession C. Depressions occur because prices adjust too rapidly to change in supply and demand D. Economic activity can be described in terms of mechanical interaction among aggregates like consumption, investment and GDParrow_forward
- Suppose Bank of England is considering using the tool of cutting interest rates to boost household consumption. In this question you will be asked to use the intertemporal choice model to assess the impact of different policies on household consumption. Suppose a consumer's current income is £25,000 and their future income is £30,000, and they initially face a market interest rate of 15% on both saving and borrowing. (a) In a diagram with consumption this year (C1) on the horizontal axis and consumption next year (C2) on the vertical axis, illustrate this consumer's budget constraint (using the numerical values set above) and indicate their optimal choice by drawing a indifference curve convex to the origin, assuming that at the current interest rate it is optimal for them to save. (b) Calculate (using the numerical values set above) and interpret their marginal rate of time preference at their optimal choice. (c) Illustrate and explain how a fall in the market interest rate from 15%…arrow_forwardAssuming that there is no government spending or trade, an economy’s GDP is the sum of domestic consumption C and investment I, i.e. Y = C+ I Assume that I is unaffected by GDP Assume the consumption function is C = c0 + c1Y In any equilibrium aggregate demand, AD must be equal to Y, GDP. Given this model, which FIVE of the following statements are correct? Select one or more: A. If the economy above is a demand-driven economy, then the equilibrium solution for Y is given by Y = m(c0 + I), where m = 1/(1 - c1) is the multiplier. B. if c1 = 0.8 the multiplier is equal to 1/0.8= 1.25 C. if c1 = 0.75 the multiplier is equal to 4 D. assume c0 =100, I=50, c1=0.6. The equilibrium value of Y in a demand-driven economy is 300. E. Assume that Y is initially 400, I is initially 100, and the multiplier is 2.5. I increases by 10%. The multiplier implies that in equilibrium Y will increase by 25%. F. The higher is c1 the larger is the multiplier G. If consumers…arrow_forwardIn the Macro Model, an increase in the amount of Capital in an economy due to Investment spending Group of answer choices Shifts only the Aggregate Demand Curve Shifts only the Aggregate Supply Curve Shifts only the slope of the Aggregate Supply Curve Shifts both the Aggregate Demand Curve and Aggregate Supply Curvearrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
