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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Chapter 32.A, Problem 2AP
To determine
Aggregate Demand Shifts and the Aggregate Expenditure Model.
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Assume that the full-employment level of output is $1,000 and the price level associated with full-employment output is 100. Also assume that the economy's current level of output is $1,100 and, at the price level of 100, current aggregate demand is $1,200. If the government moves the economy back to the full-employment level of output by reducing government purchases by $50, then the expenditures multiplier equals
Multiple Choice
10.
4.
5.
2.
Assuming the MPC = 0.75, determine the size of the simple spending multiplier, the size and direction of the shift in the aggregate expenditure line, the size and direction of the total change in real GDP demanded, and the size and direction of the shift in aggregate demand following a $20 billion decrease in autonomous investment. Illustrate your answer with graphs of the aggregate expenditure line and the aggregate demand curve (showing how the curves shift) .
Note:-
Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism.
Answer completely.
You will get up vote for sure.
If government purchases increase by $20 billion and aggregate demand shifts rightward by $30 billion as a result, we can conclude that:
Question 32 options:
the spending multiplier is 3.00
the MPC for this economy is 0.33
the MPW for this economy is 0.33
unemployment is rising
the spending multiplier is 2.00
Chapter 32 Solutions
Economics (Irwin Economics)
Ch. 32.7 - Prob. 1QQCh. 32.7 - Prob. 2QQCh. 32.7 - Prob. 3QQCh. 32.7 - Prob. 4QQCh. 32.A - Prob. 1ADQCh. 32.A - Prob. 2ADQCh. 32.A - Prob. 1ARQCh. 32.A - Prob. 2ARQCh. 32.A - Prob. 1APCh. 32.A - Prob. 2AP
Ch. 32 - Prob. 1DQCh. 32 - Prob. 2DQCh. 32 - Prob. 3DQCh. 32 - Prob. 4DQCh. 32 - Prob. 5DQCh. 32 - Prob. 6DQCh. 32 - Prob. 7DQCh. 32 - Prob. 8DQCh. 32 - Prob. 9DQCh. 32 - Prob. 1RQCh. 32 - Prob. 2RQCh. 32 - Prob. 3RQCh. 32 - Prob. 4RQCh. 32 - Prob. 5RQCh. 32 - Prob. 6RQCh. 32 - Prob. 7RQCh. 32 - Prob. 8RQCh. 32 - Prob. 9RQCh. 32 - Prob. 1PCh. 32 - Prob. 2PCh. 32 - Prob. 3PCh. 32 - Prob. 4PCh. 32 - Prob. 5P
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- Income is 678 Trillion and consumption is 662 Trillion then income increases to 698 Trillion and consumption increases to 677 Trillion. What will the marginal propensity to consume be? .75 .8566 1.8 .8 None of the above Using the information and the calculations from question seven what will the multiplier be 9 4 5 3 None of the above Using the information and the calculations from questions seven and eight and given a full employment level of aggregate expenditure GDP of 600 and a current level of aggregate expenditure of 560 how much would government spending have to change to regain the full employment level of GDP Increase in government spending of 8 Decrease in government spending of 8 Increase in government spending of 10 Decrease in government spending of 10 None of the above Using the information and calculations form questions seven, eight, and nine how much would government taxes have to change by in order to regain the full employment level of…arrow_forwardIf the Keynesian consumption function were C = 2,000 + 0.75YD , what would the value of the tax multiplier be, and how much would equilibrium $output/$income, Y, change if taxes were decreased by 200? Group of answer choices A) Tax multiplier = - 4 ; change in Y = + $160 B) Tax multiplier = - 5 ; change in Y = + $1,000. C) Tax multiplier = - 4 ; change in Y = + $800. D) Tax multiplier = - 5 ; change in Y = + $4,000. E) Tax multiplier = - 3 ; change in Y = + $600.arrow_forwardAssume that a hypothetical economy with an MPC of 0.75 is experiencing severe recession. Instructions: In part a, round your answers to 2 decimal places. Enter positive numbers. In part b, enter your answers as whole numbers. a. By how much would government spending have to rise to shift the aggregate demand curve rightward by $40 billion? $ billion. How large a tax cut would be needed to achieve the same increase in aggregate demand? $ billion. b. Determine one possible combination of government spending increases and tax increases that would accomplish the same goal without changing the amount of outstanding debt (because it maintains a balanced budget, G = T). Increase spending by $ billion. Increase taxes by $ billion.arrow_forward
- Due to an increase in consumer wealth, there is a $40 billion autonomous increase in consumer spending in the economies of Westlandia and Eastlandia. Assuming that the aggregate price level is constant, the interest rate is fixed in both countries, and there are no taxes and no foreign trade, complete the accompanying tables to show the various rounds of increased spending that will occur in both economies if the marginal propensity to consume is 0.5 in Westlandia and 0.75 in Eastlandia. What do your results indicate about the relationship between the size of the marginal propensity to consume and the multiplier?arrow_forwardSuppose that when government lowers corporate taxes this results in an increase in business investment of $280 billion. Further assume that MPC = 0.93. Calculate the value of MPS: Calculate the value of the multiplier: Compute the first three rounds of multiplier effects and cumulative effect on AD: Cumulative effect on AD: 1st cycle: 2nd cycle: 3rd cycle: Compute the total cumulative impact on AD after an infinite number of cycles (the "nth" cycle):arrow_forwardQ39 which of the following is correct about the effects of tax Select one: a. Taxes affect the IS curve, as well as LM curve b. They reduce disposable income, so that there is less consumption at every level of Y c. An increase in the Tax is called a fiscal expansion d. An increase in taxes shifts the IS curve to the rightarrow_forward
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