1 for the table shown answer the following questions actual aggregate expenditure or output y billions of consumption c billions of planned investment billions of government spending g billions of net exports nx billions of

1.For the table shown, answer the following questions:

Actual aggregate expenditure or output (Y)
(billions of $)

Consumption (C)
(billions of $)

Planned investment
(billions of $)

Government spending (G)
(billions of $)

Net exports (NX)
(billions of $)

Unplanned investment (inventory change)
(billions of $)

500

300

150

100

50

600

350

700

400

800

450

900

500

a.For each level of actual aggregate expenditure, calculate unplanned inventory investment.

b.What is the equilibrium level of aggregate expenditure in this economy? How do you know?

c.Suppose that planned investment increases by $50 billion. What is the new equilibrium level of aggregate expenditure in this economy?

d.What is the marginal propensity to consume in this economy?

e.What is the expenditure multiplier in this economy?

2.For the figure shown, answer the following questions:

a.What is the expenditure multiplier in this economy?

b.What is the marginal propensity to consume in this economy?

3.For the table shown, answer the following questions:

Actual aggregate expenditure or output (Y)
(billions of $)

Consumption (C)
(billions of $)

Planned investment
(billions of $)

Government spending (G)
(billions of $)

Net exports (NX)
(billions of $)

Unplanned investment (inventory change)
(billions of $)

Future output tendency

350

200

60

90

60

400

220

450

240

500

260

550

280

a.What is the marginal propensity to consume for households in this economy?

b.Based on the assumptions of our aggregate expenditure model, fill in the columns for planned investment, government spending, and net exports. What is this type of expenditure called?

c.For each level of actual aggregate expenditure, calculate unplanned inventory investment.

d.What is the equilibrium level of aggregate expenditure in this economy? How do you know?

e.For each level of actual aggregate expenditure, label the future output tendency as “increase,” “decrease,” or “same” based on what you expect to happen to future output. What relationship does this categorization have to your answer in part d?


ASSIGNMENT #4

1)Refer to columns 1 and 6 in the table. Incorporate government into the table by assuming that it plans to tax and spend $20 billion at each possible level of GDP. Also assume that the tax is a personal tax and that government spending does not induce a shift in the private aggregate expenditures schedule. What is the change in equilibrium GDP caused by the addition of government?

2)Assume that (a) the price level is flexible upward but not downward and (b) the economy is currently operating at its full-employment output. Other things equal, how will each of the following affect the equilibrium price level and equilibrium level of real output in the short run?

a. An increase in aggregate demand.

b. A decrease in aggregate supply, with no change in aggregate demand.

c. Equal increases in aggregate demand and aggregate supply.

d. A decrease in aggregate demand.

e. An increase in aggregate demand that exceeds an increase in aggregate supply.

3)Answer the following questions on the basis of the three sets of data for the country of North Vaudeville:

a. Which set of data illustrates aggregate supply in the immediate short run in North Vaudeville? The short run? The long run?

b. Assuming no change in hours of work, if real output per hour of work increases by 10 percent, what will be the new levels of real GDP in the right column of A? Does the new data reflect an increase in aggregate supply, or does it indicate a decrease in aggregate supply?

0 replies

Leave a Reply

Want to join the discussion?
Feel free to contribute!

Leave a Reply

Your email address will not be published. Required fields are marked *