Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134079271
Author: CASE
Publisher: PEARSON
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Question
Chapter 24, Problem 1.3P
Subpart (a):
To determine
Equilibrium.
Subpart (b):
To determine
Fiscal policy for full employment level.
Subpart (c):
To determine
Fiscal policy for full employment level.
Subpart (d):
To determine
Equilibrium.
Subpart (e):
To determine
Equilibrium
Subpart (f):
To determine
Equilibrium.
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Students have asked these similar questions
Assume that total expenditure E comprises the sum of government consumption, G, household consumption, C, and investment, I. Assume a closed macroeconomic system, so that income equals expenditure Y=E. If we define household saving, SH, as SH=Y-T-C, where the cunsumption function is a fixed proportion of disposable income, C=c(Y-T), which of the following will be true?
a. Higher government spending alongside unchanged taxation will lead to higher investment and higher household saving
b. Higher government spending alongside unchanged taxation will have no effect on household saving or investment
c. Higher government spending alongside unchanged taxation will lead to higher household saving
d. Higher government spending alongside unchanged taxation will lead to lower household saving
Equilibrium in the goods market requires that Aggregate Output equals Aggregate Expenditures. Given that Consumption = Disposable Income minus Private Savings, mathematically prove that equilibrium in the goods market requires Investment (I) to equal national savings (S) -- hence the IS curve.
In a closed economy, subsistence consumption is 10 billions, households spend 60% of their net disposable income on leisure consumption, investment is constant at 40 billions, taxes are 20 billions, government spending is 20 billions and the gross domestic product is 145 billions. Assume that suppliers always respond to variations in demand, that it takes them 1 month to adjust to new demand levels and that they make adjustments once per month (if any). One day, the government increases its spending to 30 billions.
After 2 months (at the end of the 2nd month), by how much has the gross domestic product increased?
Select one:
a. 16
b. 25.
c. 32
d. 50
Chapter 24 Solutions
Principles of Economics (12th Edition)
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