ECONOMICS W/CONNECTPLUS PKG>IC<
20th Edition
ISBN: 9781259685897
Author: McConnell
Publisher: MCG CUSTOM
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Chapter 29.2, Problem 2QQ
To determine
Equilibrium GDP .
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3. What happens in the economy if total production (TP) is greater than total expenditures
(TE)?
4. What is the relationship between a change in Real GDP (assuming a change in
autonomous spending) and (the size of) the MPC.
a. Draw the circular flow of spending and income. Put a proper label on every box and flow.
b. Assume T, a, b, G, I, and NX are exogenous. Find GDP at equilibrium. Notice that
C=a+b*DI.
c. Now assume that a, b, G, I, and NX are exogenous but T=To+t*GDP. Find GDP at
equilibrium. (We did this in our class.)
In 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 output
Chapter 29 Solutions
ECONOMICS W/CONNECTPLUS PKG>IC<
Ch. 29.2 - Prob. 1QQCh. 29.2 - Prob. 2QQCh. 29.2 - Prob. 3QQCh. 29.2 - Prob. 4QQCh. 29.7 - Prob. 1QQCh. 29.7 - Prob. 2QQCh. 29.7 - Prob. 3QQCh. 29.7 - Prob. 4QQCh. 29 - Prob. 1DQCh. 29 - Prob. 2DQ
Ch. 29 - Prob. 3DQCh. 29 - Prob. 4DQCh. 29 - Prob. 5DQCh. 29 - Prob. 6DQCh. 29 - Prob. 7DQCh. 29 - Prob. 8DQCh. 29 - Prob. 1RQCh. 29 - Prob. 2RQCh. 29 - Prob. 3RQCh. 29 - Prob. 4RQCh. 29 - Prob. 5RQCh. 29 - Prob. 6RQCh. 29 - Prob. 7RQCh. 29 - Prob. 8RQCh. 29 - Prob. 9RQCh. 29 - Prob. 1PCh. 29 - Prob. 2PCh. 29 - Prob. 3PCh. 29 - Prob. 4PCh. 29 - Prob. 5PCh. 29 - Prob. 6PCh. 29 - Prob. 7PCh. 29 - Prob. 8PCh. 29 - Prob. 9PCh. 29 - Prob. 10P
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- What is the equilibrium in this economy? Planned Change in Net Exports (NX) Aggregate Expenditures (AE) Government Real GDP (Y) Consumption (C) Investment (1')| Purchases (G) Inventories 1500 1100 250 1600 1175 100 1700 1250 1800 1900 2000 75 Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a 1500 b 1600 1700 d. 1800arrow_forwardAssume that the Equilibrium GDP is $4,000 billion. The Potential GDP is $5,000 billion. The marginal propensity to consume is 4/5 (0.8). By how much and in what direction should government purchases be changed? a. increase by $1,000 billion. c. increase by $100 billion. b. decrease by $1,000 billion. d. increase by $200 billion.arrow_forward5. The value of the U.S. dollar is expected to increase versus foreign currencies. Use the Aggregate Expenditure/Income model to: a. Determine whether Aggregate Expenditures will increase or decrease. b. Determine whether Inventories will increase or decrease. c. Determine whether Consumption will increase or decrease. d. Determine whether Real GDP/Income will increase or decrease. Explain Carefully.arrow_forward
- A temporary increase in government expenditure will a. Shift the saving curve to the right b. Shift the investment curve to the right c. Shift the investment curve to the left d. Shift the saving curve to the leftarrow_forwardIn the short-run aggregate expenditure model, if GDP is less than aggregate planned expenditures, output will a. decrease as business cut back on production due to rising inventory levels b. increase as business ramp up production due to falling inventory levels c. stay the same and prices will increasearrow_forwardTotal planned expenditure is also called ______. a. Exports minus imports b. Aggregate demand c. Aggregate supply d. Revenues greater than expensesarrow_forward
- Please explain all and explain the right and wrong answers also Q1. If consumption was 60 percent of GDP, investment was 15 percent of GDP, and government expenditure was 15 percent, then we see that: a)There must be no exports and imports. b)Exports must be equal to imports. c)Exports must be less than imports. d)Exports must be more than imports. Q2. Nominal GDP grew by 10% and real GDP grew by 8%, then we see that a)Inflation measured by consumer price index was negative. b)Inflation measured by GDP deflator was positive. c)Inflation measured by GDP deflator was negative. d) Inflation measured by consumer price index was positive. Q3. Country "X" government borrows heavily from foreign banks and pays large amount of interest on her debt. Which is an appropriate description of Country X’s national economic accounting? a)GDP is lower than GNI. b)GDP is higher than GNI c) Net factor income from abroad is positive. d) Country X is running a trade deficit. Q4. A country's…arrow_forwarda. By how much will GDP change if firms increase their investment by $11 billion and the MPC is 0.8? Instructions: Round your answers to the nearest whole number. The change in GDP $ billion. b. If the MPC is 0.5? The change in GDP = $ billion.arrow_forwardBusinesses in the nation of Islandia have been accumulating cash because they have a pessimistic outlook of the national economy. Recent changes in the economic outlook of Islandia have caused business leaders to begin to invest some of their accumulated cash. Suppose that businesses in the country invest a total of $40 billion of this cash. Instructions: Enter a positive number to show an increase and a negative number to show a decrease. a. What would be the maximum expected change in GDP if Islandia's marginal propensity to consume (MPC) is 0.75? $ billion b. Suppose that the recent economic outlook in the country of Mountainia has been the opposite. Businesses have postponed planned investments and have begun to accumulate cash. If businesses in Mountainia postpone $12 billion of their planned investments, what would be the maximum expected change in GDP if its marginal propensity to save (MPS) is 0.05? $ billionarrow_forward
- In a two-sector economy, Aggregate Expenditure (AE) equals Select one: A. C +1+G В. С C. C +|+ G + (X-M) D. C +| Given the following data GDP = RM11,920 billion; investment = RM 2,100 billion; government purchases = RM 3,450 billion. What does consumption equal? Select one: A. RM 6370 billion. B. RM 2100 billion. C. RM 9820 billion. D. RM 8470 billion. When income is equal to zero, consumption is equal to Select one: A. endogenous consumption B. autonomous consumption C. aggregate consumption D. induced consumptionarrow_forwardAssume that GDP increases by 1. Then consumption will.... Select one: a. ... increase by the marginal propensity to consume b. ... increase by 1 minus subsistence consumption C. ... increase by an unknown amount d. increase by 1arrow_forward1.If the real GDP is 1000 and Investment is 150, Government Spending is 250 and Net Exports equals -100, then Consumption must be?arrow_forward
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