Economics: Principles & Policy
14th Edition
ISBN: 9781337696326
Author: William J. Baumol; Alan S. Blinder; John L. Solow
Publisher: Cengage Learning
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Chapter 25, Problem 1TY
To determine
Determine the equilibrium level of
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From the following data, determine the equilibrium level of real GDP.The equilibrium level of real GDP is ______________.
Suppose the aggregate expenditure schedule for an economy is given by the equation:
AE = 800 + 0.8Y
Where AE represents the aggregate expenditure and Y represents the national income (output) level.
Calculate the equilibrium level of national income in this economy.
In the future report of U.S. Gross Domestic Product (GDP) for Quarter 1 of 2023, which of the following would not be an example of an expenditure that would contribute to an increase in the level of GDP in Q1 of 2023? [note: focus on the direct impact of each of the choices below]
Group of answer choices
U.S. household spending on home appliances increases by 0.5% in 2023:Q1
Business investment spending on industrial equipment rises by 2% in 2023:Q1
U.S. Federal government interest payments rise by $120 billion in 2023:Q4
U.S. consumer spending on domestic air travel increases by 8% in 2023:Q1.
None of the choices listed because all would contribute to an increase in real GDP in 2023:Q1.
Chapter 25 Solutions
Economics: Principles & Policy
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- For the data in the following table, the consumption function is C=800+0.6(Y-T). fill in the columns in the table and identify the equilibrium output. graph aggregate expenditurearrow_forwardExamine the graph above. Suppose that government increases its spending, shifting the aggregate expenditure line upwards. GDP increases from GDP1 to GDP2, and this amount is $550 billion. If the MPC is 0.8, calculate the difference between the points N and L to find out by how much the government spending changed.arrow_forwardUse the orange line (square symbol) to plot a 45-degree line on this graph. Then use the blue points (circle symbols) to plot the aggregate expenditure line for this economy. Also, use the black point (plus symbol) to indicate the equilibrium output at this price level.arrow_forward
- Assume an economy has a consumption function of C = 0.60 (Yd) + $856.02. Additionally, this economy has investment spending = $421.91, government purchases = $224.77, taxes = $192.45, exports = $193.13, and imports = $249.19. What is the equilibrium level of GDP based on this information? Round your answer to two digits after the decimal.arrow_forwardTo graphically represent this, you can create a simple Keynesian cross diagram. On the vertical axis, plot the national income (Y), and on the horizontal axis, plot the aggregate expenditure (C + I + G). The equilibrium point will be where the aggregate expenditure line intersects the 45-degree line representing national income. also add explanationarrow_forwardMacroeconomic equilibrium occurs when aggregate expenditure = GDP. aggregate expenditure = C+ I + G + net transfers. aggregate income = planned inventories. aggregate income = planned inventories. 88. If economists forecast a decrease in aggregate expenditure, which of the following is likely to occur? GDP will rise. GDP will fall. Wages will rise. Inventories will fall.arrow_forward
- Write out and explain the GDP and Aggregate Expenditure identity equations.arrow_forwardIn a simple model of the supply and demand for pizza, when aggregate income increases, the price of pizza ______ and the quantity purchased ______.arrow_forwardIn the aggregate expenditure model, what is NOT necessarily a characteristic of an economy in equilibrium?(a) The aggregate expenditure line is equal to the 45-degree line.(b) Aggregate expenditures are equal to income.(c) Investment equals saving.(d) Nothing is pressuring the economy to move to a higher or lower level of outputarrow_forward
- Differentiate between an induced increase in consumption and in autonomous increase in consumption how are they represented on a grapharrow_forwardFrom the graph above, complete the aggregate expenditure function from the information provided. ( AE = ___ + ___Yarrow_forwardCalculate the four components of aggregate expenditure and GDP for the following economy using data from the table below.Instructions: Enter your responses as whole numbers. If you are entering any negative numbers, be sure to include a negative (-) sign in front of those numbers. GDP Consumption expenditures $600 Exports $75 Government purchases of goods and services $200 Construction of new homes and apartments $100 Sales of existing homes and apartments $200 Imports $100 Beginning-of-year inventory stocks $100 End-of-year inventory stocks $150 Business fixed investment $100 Government payments to retirees $100 Household purchases of durable goods $150 Consumption expenditures: $ Investment expenditures: $ Government Purchases: $ Net Exports: $ GDP: $arrow_forward
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