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 2RQ
To determine
Spending and equilibrium.
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Students have asked these similar questions
Suppose consumption function is specified as C= $200 + 0.75Ya planned investment is $600, net taxes are $400, and
government spending totals $500 of a hypothetical economy in 2020. Find algebraically: LO 3
A. The equilibrium level of aggregate output by equating aggregate output and planned aggregate expenditure.
B. Consumption when aggregate output is at the equilibrium level.
C. Saving when aggregate output is at the equilibrium level.
D. Establish that leakages equal injections at the equilibrium level of aggregate output.
4. Below is a list of domestic output and national income figures for
a certain year. All figures are in billions. The questions that follow
ask you to determine the major national income measures by both
the expenditures and income approaches. The results you obtain
with the different methods should be the same. LO7.4
Personal consumption expenditures
$245
7.
Net foreign factor income
4
Transfer payments
12
Rents
14
Consumption of fixed capital (depreciation)
27
Statistical discrepancy
8.
Social Security contributions
20
Interest
13
Proprietors' income
33
Net exports
11
Dividends
16
Compensation of employees
223
Taxes on production and imports
18
Undistributed corporate profits
21
Personal taxes
26
19
Corporate income taxes
56
Corporate profits
72
Government purchases
33
Net private domestic investment
20
Personal saving
a. Using the above data, determine GDP by both the expenditures
approach and the income approach. Then determine NDP.
b. Now determine NI in two ways: first, by…
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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- /se estion 5 Suppose you were looking at an economy where the consumption function is; C = 50 +0.75Y And you know that investors want to spend 500 at every level of income. In other words 1-500 a. What is the equilibrium level of income? b. If the full - employment level of income is 2000, is there a recessionary gap? If so, how large is the gap? c. What will happen to the equilibrium level of income if investors become pessimistic about the country's future and reduce their investment to 400? d. Is there an inflationary or recessionary gap now? How large? marks) Format Tools Table TV- BIU AV V T²v / povarrow_forwardADVANCED 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=arrow_forwardSuppose that the investment demand curve in a certain economy is such that investment declines by $110 billion for every 1 percentage point increase in the real interest rate. Also, suppose that the investment demand curve shifts rightward by $190 billion at each real interest rate for every 1 percentage point increase in the expected rate of return from investment. If stimulus spending (an expansionary fiscal policy) by government increases the real interest rate by 2 percentage points, but also raises the expected rate of return on investment by 1 percentage point, how much investment, if any, will be crowded out? Instructions: Enter your answer as a whole number. billion %24arrow_forward
- In the Keynesian AE model, if the autonomous components of consumption, investment, government spending, and net export spending total $100 billion, and the MPC is 0.75, what will unplanned changes in inventory be when output is $345 billion? O-$4 billion O $4 billion O $5 billion O -$5 billion When output is higher than the intersection of the Keynesian AE and the 45- degree line, which of the following can we expect to happen? Osavings to be negative and consumption to fall O inventories to rise and output to fall O inventories to fall and output to rise consumers to expect higher incomes and consumption to risearrow_forwardSuppose that the investment demand curve in a certain economy is such that investment declines by $110 billion for every 1 percentage point increase in the real interest rate. Also, suppose that the investment demand curve shifts rightward by $170 billion at each real interest rate for every 1 percentage point increase in the expected rate of return from investment. If stimulus spending (an expansionary fiscal policy) by government increases the real interest rate by 2 percentage points, but also raises the expected rate of return on investment by 1 percentage point, how much investment, if any, will be crowded out? Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.arrow_forwardGDP $0 1 2 Consumption $0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 D 8 4.5 As shown in Exhibit 9-1, if equilibrium GDP is $5 trillion, then the total of investment, government spending, and net exports is: 8 4.5 As shown in Exhibit 9-1, if equilibrium GDP is $5 trillion, then the total of investme O $1 trillion. $2 trillion. O $3 trillion. O $4 trillion. $6 trillion. 4 Aggregate Expenditures 6 Unplanned inventoryarrow_forward
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