Macroeconomics, Student Value Edition Plus MyLab Economics with Pearson eText -- Access Card Package (7th Edition)
7th Edition
ISBN: 9780134472669
Author: Blanchard
Publisher: PEARSON
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Question
Chapter 5, Problem 2QAP
a.
To determine
To explain:Value of multiplier for a change in autonomous spending.
b.
To determine
To explain: The effect of change in autonomous spending is bigger than what it was in sub part (a).
c.
To determine
To calculate: Equilibrium output at the interest rate (
d.
To determine
To draw: Equilibrium of this economy using IS-LM diagram.
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Consider an economy in which autonomous consumption, planned autonomous investment, autonomous government expenditure, autonomous taxes, and the marginal propensity to consume are given (there are no net exports).
Autonomous consumer spending = $3,000 Ip = $5,000 G = $3,000 T = $4,000
MPC = .75
What is the value of the multiplier?
Q4. In the Keynesian cross model, assume that the consumption function is given byC=120+0.8(Y-T).Planned investment is 200; government purchases and taxes are both 400.a. Graph planned expenditure as a function of income.b. What is the equilibrium level of income?c. If government purchases increase to 420, what is the new equilibrium income? What is the multiplier for government purchases?d. What level of government purchases is needed to achieve an income of 2,400? (Taxes remain at 400.)e. What level of taxes is needed to achieve an income of 2,400? (Government purchases remain at 400.)
Find the equilibrium level of GDP (income or V) demanded in an economy in which investment (1) is always $300, net exports (X-IM) are always - 550, government expenditures (G) and taxes (T) are each equal to $400, and the consumption function is described by the following algebraic equation:
C = 150 + 0.75Dl
DI is disposable income.
How much saving (5) is there at the equilibrium level of income.
Hint:
(1) Dl = Y (national income or GDP) minus taxes (Y-T)
(2) Income (Y) not consumed (C) must be saved (S). This means that S = Y-C.
(3) to answer this you have to set Y=AE or Y=C+1+G (X-IM), and solve for Y. Then you have to solve for S.
Chapter 5 Solutions
Macroeconomics, Student Value Edition Plus MyLab Economics with Pearson eText -- Access Card Package (7th Edition)
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