MyLab Economics with Pearson eText -- Access Card -- for Foundations of Economics
8th Edition
ISBN: 9780134518312
Author: Robin Bade, Michael Parkin
Publisher: PEARSON
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Question
Chapter 30, Problem 4IAPA
To determine
To find:
The value of disposable income, consumption expenditure and aggregate planned expenditure. Find the value of equilibrium expenditure.
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a) The accompanying table shows gross domestic product (GDP), disposable income (YD), consumer spending (C), and planned investment spending (I-planned) in an economy. Assume there is no government or foreign sector in this economy. Complete the table by calculating planned aggregate spending (AE-planned) and unplanned inventory investment (I-unplanned)
b) What is the aggregate consumption function?
c) What is Y*, income-expenditure equilibrium GDP?
d) What is the value of the multiplier?
e) If planned investment spending falls to $200 billion, what will be the new Y*?
f) If autonomous consumer spending rises to $200 billion, what will be the new Y*?
In the economy of Keynesian Island, autonomous consumption expenditure is $50 million, and the marginal propensity to consume is 0.8. Investment is $160 million, government expenditure is $190 million, and net taxes are $250 million. Investment, government purchases, and taxes are constant—they do not vary with income. The island does not trade with the rest of the world.
If the government increases its purchases by $200 million, what will be the change in the economy's equilibrium real GDP? Show the change on the graph as well.
From the table below answer the following questions Y C I G AE 0 20 15 25 100 100 15 25 200 180 15 25 300 260 15 25 400 340 15 25 500 420 15 25
1- What is the value of autonomous Consumption?
2- What is the value of new equilibrium if government purchases increase by $100?
3- What is the value of equilibrium consumption?
4- What is the value of autonomous Aggregate Expenditure?
Chapter 30 Solutions
MyLab Economics with Pearson eText -- Access Card -- for Foundations of Economics
Ch. 30 - Prob. 1SPPACh. 30 - Prob. 2SPPACh. 30 - Prob. 3SPPACh. 30 - Prob. 4SPPACh. 30 - Prob. 5SPPACh. 30 - Prob. 6SPPACh. 30 - Prob. 7SPPACh. 30 - Prob. 8SPPACh. 30 - Prob. 9SPPACh. 30 - Prob. 1IAPA
Ch. 30 - Prob. 2IAPACh. 30 - Prob. 3IAPACh. 30 - Prob. 4IAPACh. 30 - Prob. 5IAPACh. 30 - Prob. 6IAPACh. 30 - Prob. 7IAPACh. 30 - Prob. 8IAPACh. 30 - Prob. 9IAPACh. 30 - Prob. 10IAPACh. 30 - Prob. 1MCQCh. 30 - Prob. 2MCQCh. 30 - Prob. 3MCQCh. 30 - Prob. 4MCQCh. 30 - Prob. 5MCQCh. 30 - Prob. 6MCQCh. 30 - Prob. 7MCQCh. 30 - Prob. 8MCQ
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- Chapter 14 Explain the basic idea of the expenditure multiplier and the role consumers play.arrow_forwardWhat are the four categories of aggregate expenditure (demand)? Give an example of each. 9.1 Calculate the Marginal Propensity to Consume and the Marginal Propensity to Save. Fill in the blanks in the following table. Show that the MPC plus the MPS equals 1. National Income & Real GDP (Y) Consumption (C) Saving (S) MPC MPS $9,000 $8,000 $10,000 $8,600 $11,000 $9,200 $12,000 $9,800 $13,000 $10,400arrow_forward1) Following is information for the economy of Sparkle. All units are milliondollars. Their autonomous consumption is $700, and the marginal propensity to consume is 0.8.Investment spending is constant at $380, and government expenditure is constant at $300.Exports are constant at $500, and imports are constant at $800. Net taxes are constant at $100.Calculate and state your answers for the following questions.a) What is the value of consumption in this economy when the real GDP is $1100?b) What is the value of autonomous aggregate planned expenditure i.e. AE0?c) What is the value of equilibrium aggregate expenditure for this economy?d) What is the value of unplanned changes in the inventory investment when real GDP is$4000?e) What is the size of the multiplier in this economy?f) If investment spending increases by $50, what would be the value of the change in theequilibrium real GDP?arrow_forward
- Calculate the Marginal Propensity to Consume and the Marginal Propensity to Save. Fill in the blanks in the following table. Show that the MPC plus the MPS equals 1. National Income & Real GDP (Y) Consumption (C) Saving (S) MPC MPS $9,000 $8,000 $10,000 $8,600 $11,000 $9,200 $12,000 $9,800 $13,000 $10,400arrow_forwardSilesia You are provided with the following information about an imaginary economy called Silesia. Use the information provided in the table to answer the questions below. Government expenditure 400 Exports 250 Autonomous imports 50 Autonomous consumption 150 Investment Expenditure 300 Full-employment output 2040 Marginal propensity to consume 0.75 Marginal propensity to import 0.15 Source: Bester, N. 2017. Tax rate 0.25 5.1 Derive and calculate the consumption function for the data provided. Show all formulas and calculations used. 5.2 Calculate autonomous spending. Show all formulas and calculations used 5.3 Calculate the multiplier. Show all formulas and calculations used. Round off your final answer to 1 decimal.arrow_forwardExplain why the multiplier effect of an increase in consumption spending of $100 billion is larger or smaller than the effect of a tax decrease of $100 billion. (Do not just say the spending multiplier is larger or smaller. Explain why.)arrow_forward
- 3@ An economy has neither imports nor income taxes. The MPC is 0.75 and the real GDP is $120 billion. The government increases expenditures by $4 billion. The multiplier is _____ and the change in real GDP from the increase in government expenditures is _____ billion.arrow_forwardTitle You are given the following information about the Canadian economy: Autonomous consumption... Description You are given the following information about the Canadian economy: Autonomous consumption expenditure is $50 billion, investment is $200 billion, and government expenditure is $250 billion. The marginal propensity to consume is 0.7 and net taxes are $250 billion—net taxes are assumed to be constant and not vary with income. Exports are $500 billion and imports are $450 billion. a. What is the consumption function? b. What is the equation of the AE curve? c. Calculate equilibrium expenditure. d. Calculate the multiplier. e. If investment decreases to 150 billion, what is the change in equilibrium expenditure? f. Describe the process in e that moves the economy to its new equilibrium expenditure.arrow_forwardQUESTION 2 a. The following information is a three sector economy of a Consumption function (C) = 310 + 0.6Yd Investment multiplier (I) = 200 Government expenditure (G) = 170 Tax (T) = 180 i. Find value of autonomous consumption ii. Find marginal propensity to consume (MPC) and marginal propensity to save (MPS) iii) Using appropriate method, calculate national income equilibrium and show it in diagram.arrow_forward
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