Economics (Irwin Economics)
21st Edition
ISBN: 9781259723223
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Question
Chapter 31, Problem 1P
To determine
Size of MPC (Marginal propensity to Consume) and MPS (Marginal Propensity to save).
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LAST WORD What is Say's law? How does it relate to the view held by classical economists that the economy generally will operate at a position on its production possibilities curve? Use production possibilities analysis to demonstrate Keynes's view on this matter.
ADVANCED ANALYSIS Assume that the consumption schedule for a private open economy is such that consumption C= 60 +
08Y Assume further that planned investment lo government spending G, and net exports X are independent of the level
of real GDP nd constant at lg 40, G= 0, and Xp= 10. Recall also that, in equilibrium, the real output produced () is equal to
aggregate expenditures: Y= C+lg+ G+ Xp
Instructions: Round your answers to the nearest whole number.
a. Calculate the equilibrium level of income or real GDP for this economy
S 1050
b. What happens to equilibrium Yif lg changes to 20?
950
What does this outcome reveal about the size of the multiplier?
Multiplier=
2.
L Give Up!
Suppose the Japanese economy has been experiencing slow growth. As a result, the Prime Minister, who thinks John Maynard
Keynes was the greatest economist ever, has decided to increase government spending. The Prime Minister asks the head of
the economic council to determine the increase in government spending necessary to bring the economy to full employment.
Assume there is a GDP gap of 1 trillion yen and the marginal propensity to consume (MPC) is 0.60.
What advice should the head of the economic council give the Prime Minister?
O The recessionary gap is equal to 400 billion yen.
O The inflationary gap is equal to 400 billion yen.
O The recessionary gap is equal to 625 billion yen.
O The inflationary gap is equal to 625 billion yen.
Chapter 31 Solutions
Economics (Irwin Economics)
Ch. 31.2 - Prob. 1QQCh. 31.2 - Prob. 2QQCh. 31.2 - Prob. 3QQCh. 31.2 - Prob. 4QQCh. 31.7 - Prob. 1QQCh. 31.7 - Prob. 2QQCh. 31.7 - Prob. 3QQCh. 31.7 - Prob. 4QQCh. 31 - Prob. 1DQCh. 31 - Prob. 2DQ
Ch. 31 - Prob. 3DQCh. 31 - Prob. 4DQCh. 31 - Prob. 5DQCh. 31 - Prob. 6DQCh. 31 - Prob. 7DQCh. 31 - Prob. 8DQCh. 31 - Prob. 1RQCh. 31 - Prob. 2RQCh. 31 - Prob. 3RQCh. 31 - Prob. 4RQCh. 31 - Prob. 5RQCh. 31 - Prob. 6RQCh. 31 - Prob. 7RQCh. 31 - Prob. 8RQCh. 31 - Prob. 9RQCh. 31 - Prob. 1PCh. 31 - Prob. 2PCh. 31 - Prob. 3PCh. 31 - Prob. 4PCh. 31 - Prob. 5PCh. 31 - Prob. 6PCh. 31 - Prob. 7PCh. 31 - Prob. 8PCh. 31 - Prob. 9PCh. 31 - Prob. 10P
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