EBK MACROECONOMICS (FOURTH EDITION)
4th Edition
ISBN: 9780393616125
Author: Jones
Publisher: YUZU
expand_more
expand_more
format_list_bulleted
Question
Chapter 9, Problem 7E
a)
To determine
The potential output in 2018.
b)
To determine
The changes in the actual output, potential output, short-run output, and the growth rate of actual output when the potential output grows at a constant annual rate.
c)
To determine
State the situation of economy.
d)
To determine
The comparison of answer in Part c with the last column of the table.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Measuring Yt and Yt : A real-world problem faced by policymakers, forecasters, and businesses every day is how to judge the state of the economy. Consider the table below, showing hypothetical measures of real GDP in the coming years, starting at a level of $18.0 trillion in 2018. Now fill in the remaining columns of the table by answering the following questions. (a) What is potential output in 2018? You could call this a trick question, since there’s no way for you to know the answer! In a way, that’s the main point: fundamentally, we have to take some other measurements and make some assumptions. Suppose your research assistant tells you that in 2018, business surveys, unemployment reports, and recent years’ experience suggest that the economy is operating at potential output. So go ahead and write 18.0 for potential in this year. (b) Assume potential output grows at a constant annual rate of 2.5%, and complete the remainder of the table. (c) Comment on…
What is the central economic idea humorously illustrated in Art Buchwald’s piece, “Squaring the Economic Circle”? How does the central idea relate to recessions, on the one hand, and vigorous expansions, on the other?
Which of the following quarterly real GDP scenarios would
be considered a recession?
Scenario A: Q1 GDP 5.4 Billion, Q2 GDP 5.6 Billion, Q3 GDP 5.4 Billion, Q4
GDP 5.2 Billion
Scenario B: Q1 GDP 5.4 Billion, Q2 GDP 5.2 Billion, Q3 GDP 5.4 Billion, Q4
GDP 5.5 Billion
Scenario C: Q1 GDP 5.4 Billion, Q2 GDP 5.1 Billion, Q3 GDP 5.7 Billion, Q4
GDP 5.2 Billion
Chapter 9 Solutions
EBK MACROECONOMICS (FOURTH EDITION)
Knowledge Booster
Similar questions
- Consider an economy described by the following equations: Y=C+I+G C=100+.75(Y−T)C=100+.75(Y−T) I=500−50rI=500−50r G=125G=125 T=100T=100 Where: Y is GDP, C is consumption, I is investment, G is government spending, T is taxes and r is the rate of interest. Questions: a. What is the value of the multiplier? b. What is the equilibrium equation for Y? Show solution. c. Suppose the Central Bank policy is to adjust the money supply to maintain the interest rate at 4 percent,so r=4. What is the value of output? d. Assuming that no change in fiscal policy, what is the effect of a reduction in interest rate from 4 percent to 3 percent on equilibrium output. e. In this case, explain the policy that was used by the policymaker to target the aggregate demand.arrow_forwardBusinesses in the nation of Islandia have been accumulating cash because they have a pessimistic outlook of the national economy. Recent changes in the economic outlook of Islandia have caused business leaders to begin to invest some of their accumulated cash. Suppose that businesses in the country invest a total of $40 billion of this cash. Instructions: Enter a positive number to show an increase and a negative number to show a decrease. a. What would be the maximum expected change in GDP if Islandia's marginal propensity to consume (MPC) is 0.75? $ billion b. Suppose that the recent economic outlook in the country of Mountainia has been the opposite. Businesses have postponed planned investments and have begun to accumulate cash. If businesses in Mountainia postpone $12 billion of their planned investments, what would be the maximum expected change in GDP if its marginal propensity to save (MPS) is 0.05? $ billionarrow_forwardMacmillan Education WORK IT OUT LaunchPad For interactive, step-by-step help in solving the following problem, vIsitLaunchPad by using the URL on the back cover of this book. The accompanying table shows gross domestic product (GDP), disposable income (YD), con- sumer spending (C), and planned investment spending (IPlanned) in an economy. Assume there is no government or foreign sector in this economy. Complete the table by calculating planned aggre- gate spending (AEplanned) and unplanned inven- tory investment (IUnplanned). 13. а, GDP YD C IPlanned AEPlanned lunplanned (billions of dollars) $0 $0 $100 $300 400 400 400 300 800 800 700 300 1,200 1,200 1,000 300 1,600 1,600 1,300 300 2,000 2,000 1,600 300 2,400 2,400 1,900 300 ? 300 2,800 2,800 2,200 3,200 3,200 2,500 300 b. What is the aggregate consumption function? c. What is Y*, income-expenditure equilibrium GDP?arrow_forward
- A futures market trades contracts on the growth rate for nominal GDP. The contract pays $X to the buyer, where X is 100 times the growth rate in nominal GDP from last year to this year. For example, if nominal GDP grows by 1% over last year, the contract pays $100 (1 x 100). Nominal GDP last year was $28,137 billion. Contracts on the futures markets are currently selling for $460. What is the market's prediction for nominal GDP this year? Put your answer in billions. You may round to two decimal places.arrow_forwardPart C: Following graph shows business cycle fluctuation in a hypothetical economy. "Y" denotes year, and "Q" denotes quarter. What do points A, B, C, and D denote? Write at least a sentence each about what these points denote. Also, explain what represent the curve segments: A to B, B to C, and C to D. Lastly, because economic activity fluctuates, how is long-term growth possible? Real GDP (billion $) 50 45 40 B 35 30 25 20 15 10 5 Y1Q1 Y1Q2 Y1Q3 Y1Q4 Y2 Q1 Y2 Q2 Y2 Q4 Y3 Q1 Y3Q2 un oarrow_forwardThe government of Australia has embarked on various policies in order to reduce the severity of COVID 19 on the economy. Has COVID 19 caused economic expansion or a recession? Explain your answer using at least two economic effects on the economy of Australiaarrow_forward
- For the following question , please indicate whether current GDP of the United States will be affected and, if so, by how much .In each case, indicate also which component(s) of GDP will be affected and by how much In August 2020 Marie received unemployment benefits for $4,000 and, in May, she received her $1,400 Economic Impact Payment (i.e. coronavirus stimulus check) from the IRS (the tax authority in the US).arrow_forwardGo to these links: https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?end=2018&start=2000 https://data.worldbank.org/indicator/NY.GDP.DEFL.ZS?end=2018&start=2000 Choose the time range from 2010 to 2018. Pick one country and calculate real GDP for this country using the statistics for each year from the links. Discuss why real GDP is more appropriate for the economic analysis.arrow_forward17 01:27:36 Use the following diagrams for the U.S. economy to answer the next question. AS₁ AS₂ 这 AD Real GDP (1) AS₂ AS, * AD (3) Real GDP (2) NY AD₂ AD₁ Real GDP AD₂ Real GDP AD₁ If the economy is initially at full employment, which of the diagrams best portrays a recession resulting from a decrease in government purchases?arrow_forward
- Based on the articles “Unemployment Claims Remain Historically High” and “US Consumer Spending Rose More Slowly in July” from the August 27, 2020 and August 28, 2020 issues of the wall Street Journal, respectively, please respond to the following questions: a. What do you think caused the substantial reversal in consumer spending after the dramatic drop during March and April of 2020? Illustrate graphically how would that have affected the consumption schedule. b. What seems to be possible reasons why consumer spending has slowed down in July and August? Are these factors consistent with some of the non-income determinants of consumption discussed in the text? If so, which ones? c. Investment spending also fell dramatically during the second quarter of 2020. What shifters in the investment demand curve seem to be important here? d. Given your answer to part c, explain and illustrate graphically using the investment demand curve diagram why a Federal Reserve policy of lower interest…arrow_forwardProvide an analysis for the below graph that I generated for the following question. What is the effect of an increase in the Treasury bill rate rising from 7% to 8%, and the government bonds rate from 9% to 11%? Plot the trajectory of GDP, and discuss it.The discussion should not be less than two paragraphs. For your simulation: simulate the model for the period 1900-2000, and shock the interest rates in 1930. The plot should present the trajectory of the GDP from the original steady state (with interest rates 7% and 9%) to the new one. find the trajectory below.arrow_forwardUse the blue points (circle symbol) to plot the real GDP in each of the years listed. (Note: Plot your points in the order in which you would like them connected. Line segments will connect the points automatically.) Next, place the black point (plus symbol) on the graph to indicate the point on the real GDP curve that definitely represents a peak. Finally, place the grey point (star symbol) on the graph to indicate the point on the real GDP curve that definitely represents a trough.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Economics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage Learning
Economics (MindTap Course List)
Economics
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Cengage Learning