Note: Line segments will automatically connect the points.PRICE LEVEL (Billions of dollars)200160120080160240REAL GDP (Index numbers)The equilibrium price level is320400Initial ADThe change in government spendingthe multiplier effect.SRASNew AD✓, and the equilibrium level of real output isSuppose that the government spending increases by $16 billion and the expenditure multiplier in this economy is 5.On the previous graph, use the purple points (diamond symbols) to illustrate the effect of the increase in government spending on the aggregate demand(New AD) curve.the equilibrium level of real output by. The price level increase 2. EquilibriumThe following table shows the real output demanded and supplied at various price levels in a hypothetical economy.Real Output Demanded(Billions of dollars)4080120200320Price Level(Index number)160120804020Real Output Supplied (Billions of dollars)(Billions of dollars)34032028020080On the following graph, use the blue points (circle symbols) to plot the aggregate demand (Initial AD) curve for the economy. Then use the orange points(square symbols) to plot the short-run aggregate supply (SRAS) curve for the economy.Note: Line segments will automatically connect the points.

The equilibrium level in macro economy is achieved at the level where AD=SRAS=LRAS. This is called…

Note: Line segments will automatically connect the points. PRICE LEVEL (Billions of dollars) 200 160 120 40 0 0 80 160 240 REAL GDP (Index numbers) The equilibrium price level is 320 400 The change in government spending the multiplier effect. Initial AD -O SRAS New AD and the equilibrium level of real output is Suppose that the government spending increases by $16 billion and the expenditure multiplier in this economy is 5. On the previous graph, use the purple points (diamond symbols) to illustrate the effect of the increase in government spending on the aggregate demand (New AD) curve. ▼ the equilibrium level of real output by . The price level increase

Note: Line segments will automatically connect the points. PRICE LEVEL (Billions of dollars) 200 160 120 40 0 0 80 160 240 REAL GDP (Index numbers) The equilibrium price level is 320 400 The change in government spending the multiplier effect. Initial AD -O SRAS New AD and the equilibrium level of real output is Suppose that the government spending increases by $16 billion and the expenditure multiplier in this economy is 5. On the previous graph, use the purple points (diamond symbols) to illustrate the effect of the increase in government spending on the aggregate demand (New AD) curve. ▼ the equilibrium level of real output by . The price level increase

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter9: Aggregate Demand

Section: Chapter Questions

Problem 6.13P

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Exercise D24 Compare two policies: a tax cut on income or an increase in government spending on roads and bridges. What are both the short-term and longâ€”term impacts of such policies on the economy?
Y C I G X $ 100 $ 120 $ 20 $ 30 $ 10 $ 300 $ 300 $ 20 $ 30 - $ 10 $ 500 $ 480 $ 20 $ 30 - $ 30 $ 700 $ 660 $ 20 $ 30 - $ 50 14.If government spending increases by $ 15, what is the new equilibrium level of the real GDP? If government spending increases by $ 15 then to find the new equilibrium I can use the recessionary GAP formula Recessionary GAP = GDP Gap / Spending Multiplier (5) 15 = GDP Gap (5) 5 75 = GDP Gap GDP Gap + Old equilibrium level of the real GDP =…
Hi there . can you please assist on the folloiwng question below. Use the following information on economy X to answer the questions below.Consumption function: C = 250 + 0.8YInvestment spending: I = 150Government spending: G = 500Exports of goods and services: X = 200Imports of goods and services: Z = 150Proportional tax rate: t =25%Full employment level of income = 3575 Q..1.1 Calculate total autonomus spending for economy X. Q..1.2 Calculate the multiplier for economy X. Q.1.3 Calculate the equilibrium income for the economy. Q.1.4 Calculate the change in government spending required to reachfull employment level of income.
Suppose an economy with the following characteristics.Y = Real GDP or national incomeT = Taxes = 0.3YC = Consumption = 140 + 0.9(Y – T)I = Investment = 400G = Government spending = 800X = Exports = 600M = Imports = 0.15YGiven the information above, What is this economy’s spending multiplier?
2. Given:C = 250 + 0.8 Y I = 150G = 300TR = 100NX = 100 t =0.25i)Find the equilibrium level of income.(ii)Suppose, b10, G falls to 100 and NX falls to 10. How much TR should the government increase to have the same level of equilibrium income as in part i)?(iii)In determining the required change in TR in part ii), which multiplier did you use and why? (Hint: keep in mind the consumption tendency households may have under the COVID 19 situation in selecting the multiplier).(iv)Draw a graph to show the appropriate changes between part i) and part ii).(v)Give an example related to current Bangladeshi situation where the government may follow a 'Transfer Promoting Policy' instead of a 'Growth Promoting Policy' in determining who gets the transfer payment.(vi)Instead of paying transfer (TR) if the government were to increase government spending (G), what type of crowding out would you expect? Briefly explain.(vii) As we have observed recently that, a lot of the assistance from the…
Suppose there is some hypothetical economy in which households spend $0.50 of each additional dollar they earn and save the $0.50 they have left over. The following graph plots the economy's initial aggregate demand curve (AD1). Suppose now that the government increases its purchases by $3.5 billion. of Use the green line (triangle symbol) on the following graph to show the aggregate demand curve (AD) after the multiplier effect takes place. Hint: Be sure the new aggregate demand curve (ADs) is parallel to ADj. You can see the slope of 4D, by selecting it on the following graph. Suppose that for every increase in the interest rate of one percentage point, the level of investment spending declines by $2 billion. Based on the changes made to the money market in the previous scenario, the new interest rate causes the level of investment spending to_____ Y by______ Taking the multiplier effect into account, the change in investment spending will cause the quantity of output demanded…
1. Calculate GDP loss if equilibrium level of GDP is $8,000, unemployment rate 8.8%, and the MPC is 0.80. Hint: (Use Okun's law to calculate GDP loss) a) How much money should the government spend to eliminate this GDP loss? b) Calculate the tax cut needed to eliminate this GDP loss. 2. Calculate MPC, MPS and the Multiplier if consumption expenditure increases by $4,000 as a result of increase in income from $40,000 to $46,000. 3. Assume that initially G is $300 and equilibrium real GDP is $5000. If the multiplier is 5, what would be the new equilibrium level of GDP if Government expenditures increase to $500.
Assume: Y= C + I + G + NX C = 400 + (0.8)YD Io = 200 G = 300 + (0.1)(Y* - Y) YD = Y - TA + TR NXo = - 40 TA = (0.25)Y TRo = 50 From the model above you can see that government purchases (G) are counter-cyclical, that is, G is increased as national income decreases. If you compare this specification of G with one that has a constant level of government spending (for example, Go = 300), how would the value of the expenditure multiplier differ?
Given: C = 250 + 0.8 Y I = 150G = 300TR = 100NX = 100t =0.25i) Find the equilibrium level of income.ii) Suppose, because of the current COVID 19 situation Ꞓ falls to 50, MPS falls to .05, I falls to 10, G falls to 100 and NX falls to 10. How much TR should the government increase to have the same level of equilibrium income as in part i)?iii) In determining the required change in TR in part ii), which multiplier did you use and why? (Hint: keep in mind the consumption tendency households may have under the COVID 19 situation in selecting the multiplier).iv) Draw a graph to show the appropriate changes between part i) and part ii).v) Give an example related to current Bangladeshi situation where the government may follow a 'Transfer Promoting Policy' instead of a 'Growth Promoting Policy' in determining who gets the transfer payment.vi) Instead of paying transfer (TR) if the government were to increase government spending (G), what type of crowding out would you expect? Briefly…
the following information on economy X to answer the questions below.Consumption function: C = 250 + 0.8YInvestment spending: I = 150Government spending: G = 500Exports of goods and services: X = 200Imports of goods and services: Z = 150Proportional tax rate: t =25%Full employment level of income = 3575Q.4.1.1Calculate total autonomus spending for economy X.Q.4.1.2Calculate the multiplier for economy X.Q.4.1.3Calculate the equilibrium income for the economy.Q.4.1.4Calculate the change in government spending required to reach full employment level of income.
5. Fiscal pollcy, the money market, and aggregate demand Suppose there is some hypothetical economy in which households spend $0.50 of each additional dollar they earn and save the $0.50 they have left over. The following graph plots the economy's initial aggregate demand curve (AD1). Suppose now that the government increases its purchases by $2.5 billion. / Tools Use the green line (triangle symbol) on the following graph to show the aggregate demand curve (AD,) after the multiplier effect takes place. Hint: Be sure the new aggregate demand curve (ADs) is parallel to ADj. You can see the slope of ADi by selecting it on the following graph. Suppose that for every increase in the interest rate of one percentage point, the level of investment spending declines by $0.5 billion. Based on the changes made to the money market in the previous scenario, the new interest rate causes the level of investment spending to _____ by____ A-z T Tips Tips Taking the multiplier effect into account, the…
Consider a hypothetical economy. Households spend $0.50 of each additional dollar they earn and save the remaining $0.50. The multiplier for this economy is . Suppose government purchases, G, in this economy increase by $300 billion. The increase in G will lead to an increase in income, generating an increase in consumption that increases income yet again, and so on. Fill in the following table to show the impact of the change in G on the first two rounds of consumption spending and, eventually, on national income. Note: Use negative signs if numbers are negative. Change in G = $300 billion First Change in Consumption = billion Second Change in Consumption = billion • • • • • • Total Change in Income = billion Now consider the impact of a similar change in taxes. The (absolute value) of the tax multiplier in this question will be ; thus, if taxes change by $300 billion, spending will change by billion. Based on…