Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter24: The Aggregate Demand/aggregate Supply Model
Section: Chapter Questions
Problem 61P: Table 24.4 describes Santhers economy. Plot the AD/AS curves and identify the equilibrium. Would you...
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2.Answer the question.
![9. Refer to the accompanying table in answering the questions
that follow: L011.8
(1)
Possible Levels
of Employment,
Millions
90
100
110
120
130
(2)
Real Domestic Aggregate Expenditures
Output,
Millions
(3)
$500
550
600
650
700
(C+I+X+G),
Millions
$520
560
600
640
680
a. If full employment in this economy is 130 million, will
there be an inflationary expenditure gap or a recessionary
expenditure gap? What will be the consequence of this gap?
By how much would aggregate expenditures in column 3
have to change at each level of GDP to eliminate the
inflationary expenditure gap or the recessionary expenditure
gap? What is the multiplier in this example?
b. Will there be an inflationary expenditure gap or a recessionary
expenditure gap if the full-employment level of output is $500
billion? By how much would aggregate expenditures in
column 3 have to change at each level of GDP to eliminate the
gap? What is the multiplier in this example?
c. Assuming that investment, net exports, and government
expenditures do not change with changes in real GDP, what
are the sizes of the MPC, the MPS, and the multiplier?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fe8dbfafd-b3df-4768-a3ae-839a30223655%2Fdd510546-fba7-4fa5-ad42-ed1302e90d66%2F5hkdt1n_processed.jpeg&w=3840&q=75)
Transcribed Image Text:9. Refer to the accompanying table in answering the questions
that follow: L011.8
(1)
Possible Levels
of Employment,
Millions
90
100
110
120
130
(2)
Real Domestic Aggregate Expenditures
Output,
Millions
(3)
$500
550
600
650
700
(C+I+X+G),
Millions
$520
560
600
640
680
a. If full employment in this economy is 130 million, will
there be an inflationary expenditure gap or a recessionary
expenditure gap? What will be the consequence of this gap?
By how much would aggregate expenditures in column 3
have to change at each level of GDP to eliminate the
inflationary expenditure gap or the recessionary expenditure
gap? What is the multiplier in this example?
b. Will there be an inflationary expenditure gap or a recessionary
expenditure gap if the full-employment level of output is $500
billion? By how much would aggregate expenditures in
column 3 have to change at each level of GDP to eliminate the
gap? What is the multiplier in this example?
c. Assuming that investment, net exports, and government
expenditures do not change with changes in real GDP, what
are the sizes of the MPC, the MPS, and the multiplier?
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