Economics (Irwin Economics)
21st Edition
ISBN: 9781259723223
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Question
Chapter 31, Problem 6DQ
To determine
Impact of an increase in net export on real GDP (Gross Domestic Product ).
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ADVANCED ANALYSIS Assume that the consumption schedule for a private open economy is such that consumption is:
C = 100 + 0.75Y
Assume further that planned investment Ig and net exports Xn are independent of the level of real GDP and constant at Ig = 60 and Xn = 10. Recall also that, in equilibrium, the real output produced (Y) is equal to aggregate expenditures:
Y = C + Ig + Xn
Instructions: Round your answers to the nearest whole number.a. What is the equilibrium level of income or real GDP for this economy?
Equilibrium GDP (Y) = $ .
b. What happens to equilibrium Y if Ig changes to 40?
Equilibrium GDP (Y) = $ .
What does this outcome reveal about the size of the spending multiplier?
Spending multiplier = .
Suppose that consumer spending initially rises by $5 billion for every 1 percent rise in household wealth and that investment spending initially rises by $20 billion for every 1 percentage point fall in the real interest rate. Also assume that the economy�s multiplier is 3. If household wealth falls by 6 percent because of declining house values, and the real interest rate falls by 2 percentage points, in what direction and by how much will the aggregate demand curve initially shift at each price level? The aggregate demand curve will shift_____ by $____ billion. In what direction and by how much will it eventually shift? The aggregate demand curve will shift_____ by $____ billion..
ADVANCED ANALYSIS Assume that the consumption schedule for a mixed open economy is such that consumption is:
C = 250 + 0.8Yd
Assume further that planned investment Ig and net exports Xn are independent of the level of real GDP and constant at Ig = 50 and Xn = 30. Lastly, assume government spending G = 40 and taxes T = 40. Recall also that, in equilibrium, the real output produced (Y) is equal to aggregate expenditures:
Y = C + Ig + G + Xn
Given that taxes T are present, the consumption schedule can be rewritten as:
C = 250 + 0.8(Y - T)
Instructions: Enter your answers as whole numbers.a. Calculate the equilibrium level of income or real GDP for this economy.
Equilibrium GDP (Y) = $ .
b. What happens to equilibrium GDP if Xn changes to 40?
Equilibrium GDP (Y) = $ .
What does this outcome reveal about the size of the spending multiplier?
Spending multiplier = .
Chapter 31 Solutions
Economics (Irwin Economics)
Ch. 31.2 - Prob. 1QQCh. 31.2 - Prob. 2QQCh. 31.2 - Prob. 3QQCh. 31.2 - Prob. 4QQCh. 31.7 - Prob. 1QQCh. 31.7 - Prob. 2QQCh. 31.7 - Prob. 3QQCh. 31.7 - Prob. 4QQCh. 31 - Prob. 1DQCh. 31 - Prob. 2DQ
Ch. 31 - Prob. 3DQCh. 31 - Prob. 4DQCh. 31 - Prob. 5DQCh. 31 - Prob. 6DQCh. 31 - Prob. 7DQCh. 31 - Prob. 8DQCh. 31 - Prob. 1RQCh. 31 - Prob. 2RQCh. 31 - Prob. 3RQCh. 31 - Prob. 4RQCh. 31 - Prob. 5RQCh. 31 - Prob. 6RQCh. 31 - Prob. 7RQCh. 31 - Prob. 8RQCh. 31 - Prob. 9RQCh. 31 - Prob. 1PCh. 31 - Prob. 2PCh. 31 - Prob. 3PCh. 31 - Prob. 4PCh. 31 - Prob. 5PCh. 31 - Prob. 6PCh. 31 - Prob. 7PCh. 31 - Prob. 8PCh. 31 - Prob. 9PCh. 31 - Prob. 10P
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