ECON MACRO
5th Edition
ISBN: 9781337000529
Author: William A. McEachern
Publisher: Cengage Learning
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Question
Chapter 9, Problem 6.13P
Sub-Part
A
To determine
Size and direction of any changes of the aggregate expenditure line, real
B
To determine
Size and direction of any changes of the aggregate expenditure line, real GDP demanded and the aggregate demand curve when the Spending falls by $5 billion at each income level.
C
To determine
Size and direction of any changes of the aggregate expenditure line, real GDP demanded and the aggregate demand curve when the Spending rises by $20 billion at each income level.
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13 Which of the following would increase aggregate demand?
Increase in savings.
Increase in taxation.
Decrease in consumption spending.
Increase in government spending.
12.5 The Aggregate Demand Curve
1) The ________ illustrates the relationship between the price level and the quantity of planned aggregate expenditure, holding constant all other factors that affect aggregate expenditure.
A) aggregate demand curve
B) savings line
C) 45-degree line
D) consumption function
2) Which of the following is a reason why increases in the price level result in a decline in aggregate expenditure?
A) Price level increases raise real wealth, which causes consumption spending and aggregate expenditure to decline.
B) Price level increases cause firms and consumers to hold more money, which raises the interest rate. Higher interest rates lower consumption and planned investment expenditures, which lowers aggregate expenditure.
C) Price level increases in the United States relative to other countries raise net exports, which lowers aggregate expenditure.
D) As the price level rises, government spending falls, which lowers aggregate…
Table 2 shows elements in the national income accounts of an economy. Assume the economy is currently in equilibrium.
Elements
£ billions
Consumption (total)
80
Investment
9
Government Expenditure
6
Imports
15
Exports
8
What is the current equilibrium level of income?
What is the level of injections? What is the level of withdrawals?
If national income now rises by £22 billion and as a result, the consumption of domestically produced goods rises to £80 billion. Calculate the marginal propensity to consume (MPC)What is the value of the multiplier?
What is the value of the multiplier?
Comment on the results in part (3) and (4).
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- On a microeconomic demand curve, a decrease in price causes an increase in quantity demanded because the product in question is now relatively less expensive than substitute products. Explain why aggregate demand does not increase for the same reason in response to a decrease in the aggregate price level. In other words, what causes total spending to increase if it is not because goods are now cheaper?arrow_forward1 ) Changes in business inventories are: classified as government purchases. classified as consumption expenditures. classified as investment expenditures. excluded from GDP.arrow_forward7 Suppose that the government increases its expenditure on goods and services by $100 billion and pays for these goods and services by raising autonomous taxes by $100 billion. What is the effect on aggregate demand and real GDP of each change individually and of the two combinedarrow_forward
- 23) Refer to Figure 1.5. As income decreases, consumption decreases by a decreasing amount. If consumption is graphed on the vertical axis and income is graphed on the horizontal axis, the relationship between consumption and income would look like which of the following Panels? A) A B) B C) C D) D 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.arrow_forward1. Suppose that the U.S. government increases its expenditure on highways and bridges by $100 billion. Explain the effect that this expenditure would have on aggregate demand and real GDP.arrow_forward5) What factors will shift the aggregate demand curve for a given level of real domestic income?arrow_forward
- Question 1 What is the accelerator effect Explain the difference between the accelerator and the multiplier. Given that Country X has a nominal GDP of $100,000 and its real GDP is $45,000, calculate the GDP deflator.arrow_forward8) Suppose for reasons unrelated to your income, you decide to spend $1000 (in real terms) more this month than usual: a. The aggregate demand is likely to shift rightward by more than $1000 b. The aggregate demand is likely to shift rightward by $1000 c. GDP is likely to increase by $1000 d. The aggregate demand is likely to shift rightward by less than $1000arrow_forwardSuppose the economy is operating at potential GDP when It experiences an increase in export demand. How might the economy increase production of exports to meet this demand, given that the economy is already at full employment?arrow_forward
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