Economics: Principles & Policy
14th Edition
ISBN: 9781337696326
Author: William J. Baumol; Alan S. Blinder; John L. Solow
Publisher: Cengage Learning
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Question
Chapter 27.B, Problem 1TY
a)
To determine
The equilibrium level of
b)
To determine
The multipliers for government purchases and for fixed taxes.
c)
To determine
Some policies that would move GDP to the full employment level.
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Consider an economy described by the following set of equations: c = 120 +0.08Y I = 320 G = 480 X-IM = -80 T = 400 a. Find the actual level of GDP. b. If full employment comes at Y = 1000, would there be a recessionary gap or an inflationary gap? c. What spending changes will be necessary to eliminate this gap? d. What amount of tax changes will be necessary to eliminate this gap? e. What are some policies action that can be taken.
Evaluate the following statement: Even if the prices of a
large number of goods and services in the economy increase
dramatically, the real GDP for the economy can still fall.
The following are exogenous (not directly affected by income):
G = 9
I = 14
X = M = 0
The consumption function is:
C = k + cY, where k = 8, c = 0.6
What is the equilibrium level of GDP? State to ONE decimal place
What is the multiplier for this economy?
The following are exogenous (not directly affected by income):
G = 11
I = 4
X = M = 0
The consumption function is:
C = k + cY, where k = 3, c = 0.8
What is the equilibrium level of GDP?
What is the multiplier?
Same information as in the previous question:
The following are exogenous (not directly affected by income):
G = 11
I = 4
X = M = 0
The consumption function is:
C = k + cY, where k = 3, c = 0.8
Imagine the maximum potential output or real GDP of this economy is 100. Assume that is the same as saying we reach the edge of the PPF at 100.
Now assume we want to get that economy from the current level of GDP to its maximum potential of 100.
We can do this in two ways - either increase government spending (G) or reduce taxes, (we…
Chapter 27 Solutions
Economics: Principles & Policy
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