Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134079271
Author: CASE
Publisher: PEARSON
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Chapter 24, Problem 1.2P
Subpart (a):
To determine
Subpart (b):
To determine
Subpart (c):
To determine
Effect of cutting government purchases in the economy.
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Use the information in the following table to answer the questions below. Assume you are dealing with short-run aspects of the economy, so the marginal propensity to consume is constant. Also, for simplicity, assume this economy has no taxes. In your answers, expain brifly how did you get the numerical result.
Real GDP
Consumption
PlannedInvestment
GovernmentPurchases
Net Exports
$9,000
$7,800
$1,500
$1,000
-$700
$10,000
$8,600
$1,500
$1,000
-$700
$11,000
$9,400
$1,500
$1,000
-$700
$12,000
$10,200
$1,500
$1,000
-$700
$13,000
$11,000
$1,500
$1,000
-$700
$14,000
$11,800
$1,500
$1,000
-$700
Suppose net export increases by $400 (Assuming MPC, Gevernment Purchases, and Planned Investment are the same). What will be the new equilibrium level of GDP? Consumption?
Use the information in the following table to answer the questions below. Assume you are dealing with short-run aspects of the economy, so the marginal propensity to consume is constant. Also, for simplicity, assume this economy has no taxes. In your answers, expain brifly how did you get the numerical result.
Real GDP
Consumption
PlannedInvestment
GovernmentPurchases
Net Exports
$9,000
$7,800
$1,500
$1,000
-$700
$10,000
$8,600
$1,500
$1,000
-$700
$11,000
$9,400
$1,500
$1,000
-$700
$12,000
$10,200
$1,500
$1,000
-$700
$13,000
$11,000
$1,500
$1,000
-$700
$14,000
$11,800
$1,500
$1,000
-$700
(a) What is the equilibrium level of real GDP in this economy?
(b) Compute the marginal propensity to consume.
(c) Compute the government expenditures multipler.
(d) Suppose net export increases by $400 (Assuming MPC, Gevernment Purchases, and Planned Investment are the same). What will be the new equilibrium level of GDP? Consumption?
I need help with 4.5 A only . You will have to calculate marginal propensities to consume and to save. This is chapter 8 from the principals of macroeconomics thirteen edition text book .
Chapter 24 Solutions
Principles of Economics (12th Edition)
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- Please give a detailed solution with an explanation and answer all the questions provided in the image below.For the 3 blank answers here are the options:Blank Answer #1:investment or government purchases or consumptionBlank Answer #2:decreasing or increasingBlank Answer #3:an overall increase or an overall decrease or no overall changearrow_forwardExplain the difference between saving and investment as defined by a macroeconomist. Which of the following situations represent investment and which represent saving? Explain.a. Your family takes out a mortgage and buys a new house.You use your $200 paycheck to buy stock in Africel.Your roommate earns $100 and deposits it in his account at a bank.You borrow $1,000 from a bank to buy a car to use in your pizza delivery business.The interest rate is 7 percent. Use the concept of present value to compare $200 to be received in 10 years and $300 to be received in 20 years.A company has an investment project that would cost $10 million today and yield a payoff of $15 million in 4 years.Should the firm undertake the project if the interest rate is 11 percent? 10 percent? 9 percent? 8 percent?Can you figure out the exact cutoff for the interest rate between profitability and nonprofitability?arrow_forwardMacroeconomics: Assuming marginal propensity to consume is 0.5. If there is a shock to the economy that increases investment spending by 200 billion dollars what will the total Change to GDP be? (Ignore taxes and imports)arrow_forward
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