Question

Calculate GDP loss if equilibrium level of GDP is $8,000, unemployment rate 8.8%, and the MPC is 0.80. Hint: (Use Okun's law to calculate GDP loss)

a) How much money should the government spend to eliminate this GDP loss?

b) Calculate the tax cut needed to eliminate this GDP loss.

Assume that initially G is $300 and equilibrium real GDP is $5000. If the multiplier is 5, what would be the new equilibrium level of GDP if Government expenditures increase to $500.

Answer #2

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answered by: anonymous

Calculate GDP loss if equilibrium level of GDP is $8,000,
unemployment rate is 8.8%, and the MPC is 0.8 ( Use Okun's law to
calculate GDP loss) a) How much money should the government spend
to eliminate this GDP loss? b) Calculate the tax cut needed to
eliminate this GDP loss. With the natural rate of unemployment
being 5.5%

1. Calculate GDP loss if equilibrium level of GDP is
$10,000, unemployment rate 9.8%, and the MPC is 0.75.
GDP loss:
a) How much money should the government spend to
eliminate this GDP loss?
b) Calculate the tax cut needed to eliminate this GDP
loss.

The MPC for a closed economy is 0.75. Autonomous
consumption is $500, investment is $300, and government spending is
$400.
a) What is the equilibrium
level of real GDP?
b) If business increases
planned investment expenditure by 300 to 400, what is the new
equilibrium real GDP?
c) What is the slope of the AE
function in this economy and the value of the
multiplier?

67891011121314151610610510410310210110099989796PRICE LEVEL
(CPI)REAL GDP (Billions of dollars)ASFull
EmploymentAD1AD3AD2AD2
The initial short-run equilibrium level of real GDP isbillion,
and the initial short-run equilibrium price level is.
Suppose the government, seeking full employment, borrows money
and increases its expenditures by the amount it believes necessary
to close the output gap. According to critics of Keynesian fiscal
policy, which curve in the previous graph will most likely be the
new aggregate demand curve?
AD1AD1
AD2AD2
AD3AD3
As a result, the equilibrium level of...

Suppose that the economy is in a long-run equilibrium at a price
level of 100 and full-employment real GDP of $500 billion. An
expansion occurs resulting from a $100 billion increase in
aggregate demand. In order to restore the economy to full
employment, given a MPC of 0.80, government purchases would need
to:

Suppose that you have the following information for an
economy:
Marginal propensity to consume - MPC
0.80
Autonomous consumption - A
$500
Planned investment - PI
$600
Net exports - NX
-$400
Government spending - G
$300
You will need this information for the questions that
follow.
Part 1:
When real GDP is equal to $4,500, aggregate expenditure is equal
to $ .
Part 2:
When real GDP is equal to $5,000, aggregate expenditure is equal
to $ .
Part 3:
When real GDP...

Use the table below to answer the following questions
Price level
Real GDP supplied (short run)
Real GDP demanded
100
550
600
110
575
575
120
600
550
130
625
525
Calculate short-run equilibrium and the price level
If potential GDP equals 625, what is the gap called and what is
the amount of the gap?
If potential GDP equals 550, what is the gap called and what is
the amount of the gap?
Use the table below to answer...

15.
Given the following, calculate the equilibrium level of
income.
autonomous expendeture = $75
Government spending= $200
Taxes= $100
Investment= $200
The mpc= 0.75
Calculate the equilibrium level of income under the following
assumption
$575
$2300
$400
$1600
14. Why might prices be sticky in the short
run?
sticky wages (contracts)
menu costs
misperceptions
all of the above
17.Assuming a mpc of 0.80 calculate the impact on the
equilibrium level of income for a $100...

(1)
If the spending
multiplier equals 10 and the actual equilibrium real GDP is $4
billion below potential real GDP, then other things being equal,
_____ to reach the potential real GDP level.
Group of answer choices
autonomous spending
needs to increase by $40 billion
real GDP needs to
increase by $40 billion
autonomous spending
needs to increase by $4 billion
real GDP needs to
increase by $0.4 billion
autonomous spending
needs to increase by $0.4 billion
(2)
Other things...

The economy is in equilibrium, TP = TE, and Real GDP is $4,555
billion. The MPC is 0.80, the multiplier is operative, and idle
resources exist at each expenditure round. Government purchases
rise by $10 billion. As a result, the __________ curve shifts
__________, inventory levels unexpectedly __________, business
firms ___________ the quantity of goods and services they produce,
and Real GDP __________ by __________.
a.
TE; downward; fall; increase; rises; $10 billion.
b.
TP; rightward; fall; decrease; falls; $50...

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