EBK FOUNDATIONS OF ECONOMICS
8th Edition
ISBN: 8220103632225
Author: PARKIN
Publisher: PEARSON
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Question
Chapter 30, Problem 5IAPA
To determine
To explain:
The process that takes the economy to equilibrium expenditure, if real
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Students have asked these similar questions
7. Deriving and exploring the total expenditures curve
The following graph shows total production (TP) and the level of Natural Real GDP (NRGDP) for a hypothetical economy. When Real GDP is $450
billion, consumption is $375 billion, government purchases are $30 billion, and investment is $70 billion. When Real GDP is $500 billion, consumption
is $400 billion, government purchases are $30 billion, and investment is $70 billion.
Use the blue line (circle symbol) to plot the economy's total expenditure function within a simplified Keynesian framework.
TOTAL EXPENDITURE (Billions of dollars)
600
575
550
525
500
475
450
425
400
400
TP
O
425
X
NRGDP
O
450
475
500
525
REAL GDP (Billions of dollars)
550
575
600
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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.
The table shows real GDP, Y, consumption expenditure, C, investment, /,
government expenditure on goods and services, G, exports, X, imports, M, and
aggregate planned expenditure, AE, in trillions of dollars. Taxes are constant.
If government expenditure increases to $1.2 trillion but other things remain
the same, what is equilibrium expenditure and what is the multiplier?
>>> Answer to 1 decimal place.
The new equilibrium expenditure is $
trillion.
Planned expenditure
Y
C
G
X
M
AE
0
0.4
1.4
0.4
1.0
0.0
3.2
2
2.0
1.4
0.4
1.0
0.4
T
4
3.6
1.4
0.4
1.0
0.8
5.6
6
5.2
1.4
0.4
1.0
S
6.8
8
6.8
R
0.4
1.0
1.6
8.0
10
Q
1.4
0.4
1.0
2.0
9.2
12
10.0
1.4
0.4
1.0
2.4
10.4
Chapter 30 Solutions
EBK 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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- Figure 3-3 45° Planned Expenditure 200 + 0.75Y 45 Income (Y) In the figure above: a. Find the equilibrium GDP. What happens to the left of that equilibrium? What happens to the right? b. When income is $1,000, what is the unplanned inventory? c. What is the GDP multiplier? d. What is the tax multiplier? e. How much should government expenditures increase if the government wants to increase GDP from the equilibrium level found at point a) to 1,000? f. How much should taxes decrease if the government wants to increase GDP from the equilibrium level found at point a) to 1,000? Planned Expenditurearrow_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_forward3. Many parts of the economy are related to one another. In particular, a decrease in spending in one area may have an impact somewhere else. Provide an example of this scenario. Economic theory tells us that "one person's spending is another person's income." What is meant by this phrase? Explain in your own words.arrow_forward
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