Question

A small closed economy have the following characteristics

consumption function=0.9y+100

planned investment=$460

government spending=$400

taxes=$0

1.The equation of the aggregate expenditures line is: *

a.AE = 0.9 Y + 560

b.AE = 0.9 Y + 460

c.AE = 0.9 Y + 960

d.AE = 0.9 Y + 160

2.The government spending multiplier is: *

a,1

b.0.1

c.10

d.0.01

3.The slope of the aggregate expenditures curve of this economy is:

a.100

b.460

c.400

d.0.9

4.The Equilibrium is:

a.Y = 9,600

b.Y = 9,700

c.Y = 9,500

d.None of the above

5.Suppose potential GDP is equal to 12,000. By how much should government expenditures increase to reach potential GDP?

a.2400

b.10

c.2390

d.240

Answer #1

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function are given by the following equations:
C = 100,000 + .92Y I = 40,000
a. What is the equilibrium level of aggregate output for this
economy?
b. What is the saving function for this economy?
c. Check the solution, as we did in class, by showing that at
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Instructions: Enter your response as a whole
number.
(a) A $60 billion increase in government purchases?
$ billion
Instructions: Enter your responses rounded to one
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In a simple closed economy where there is no government and
investment, the consumption function of households is given by
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Select one:
a. 0.40
b. 1.66
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I
G
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AE
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$300
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$100
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$500
$50
$100
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