Question

Use the following macroeconomic model structure to answer the questions followed. Please note that you must show your work of estimations for these numerical multiple-choice questions for gradable credit. Without showing your works of estimation, your answers won’t be credible for take-home exam. 8 pts

C = 300 + 0.8Yd; C = consumption function; Yd (Y-T) = disposable
income I = 200; I = Investment

G = 400; G = Government expenditure

T = 200; T = Tax revenue

Also assume that Yf = Full employment GDP (Potential GDP) = 5,000

6.1. The equilibrium GDP level (income) is _________. Hint: Ye = C+I+G a. 2,850

b. 3,700 c. 3,145 d. 3,800

6.2. At the equilibrium level of output, the aggregate consumption level is: a. 3,100

b. 3,250 c. 3,400 d. 3,625

6.3. At the equilibrium level of output, the aggregate saving level is: a. 550

b. 450 c. 400 d. 350

6.4. The MPC and MPS for the economy is respectively: a. 0.9 and 0.1

b. 0.85 and 0.15 c. 0.75 and 0.25 d. 0.80 and 0.20

6.5. The expenditure multiplier for the economy is: a. 10

b. 8 c. 5 d. 4

6.6. The tax multiplier for the economy is: a. -3

b. -4 c. 4 d. 5

6.7. Given the value of full employment level of GDP above, the GDP gap is ______ a. 1,200

b.1,300 c. 1,400 d. 1,500

Hint: GDP gap is the difference between full employment (potential GDP) and existing equilibrium GDP)

6.8. The government spending needed to bridge the GDP gap you
found in statement 8.7 above would be _____________

Hint: It is also called recessionary or inflationary gap depending
on whether the economy is in state of recession or inflation.

a. 400 b. 350 c. 260 d. 250

Answer #1

Use the following macroeconomic model to answer the questions
from. You must show your work of estimation to obtain the
credits.
C = 50 + 0.80Yd; C = consumption function; Yd = disposable
income (Y-T)
T = 30; T = Tax revenue
I = 100; I = Investment
G = 150; G = Government expenditure
Yf = Full Employment RGDP (Potential RGDP) = 1600
1. Estimate the equilibrium GDP level (income).
2. At the equilibrium level of output you estimated...

C = 50 + 0.80Yd; C = consumption function; Yd = disposable
income (Y-T)
T = 30; T = Tax revenue I = 100;
I = Investment G = 150;
G = Government expenditure
Yf = Full Employment RGDP (Potential RGDP) = 1600
14. Using the value of MPC = 0.75, and knowing the difference
between the values of expenditure multiplier and the tax
multiplier, with reduction of taxes by $300 billion (other things
staying the same), estimate increased level...

An open economy is described by the following system of
macroeconomic equations, in which all
macroeconomic aggregates are measured in billions of Namibian
dollars, N$.
Y = C + I + G + X – M
C = 160 + 0.6Yd
T = 150 + 0.25Y
I = 150
G = 150
E = 300
M = 50 + 0.1Y, Yf = 1500
Where: Y is domestic income
Yd is private disposable income
C is aggregate consumption spending
T is...

a. A recessionary expenditure gap is the amount by which
aggregate expenditures at the full-employment GDP
fall short of those required to achieve the full-employment
GDP.
divided by the multiplier equal those required to achieve the
full-employment GDP.
equal those required to achieve the full-employment GDP and net
exports.
exceed those required to achieve the full-employment GDP.
b. An inflationary expenditure gap is the amount by which
aggregate expenditures at the full-employment GDP
fall short of those required to achieve...

Suppose an economy is represented by the following
equations.
Consumption function C = 300 + 0.8Yd
Planned investment I = 400
Government spending G = 500
Exports EX = 200
Imports IM = 0.1Yd
Autonomous Taxes T = 500
Marginal Tax Rate t=0.25
Planned aggregate expenditure AE = C + I + G + (EX - IM)
By using the above information calculate the equilibrium level of
income for this economy and explain how multiplier changes when we
have an...

I have the solutions but want to be sure. Please don't answer if
you are not sure.
1. Aggregate supply increases when
________.
A. the price level rises
B. the money wage rate falls
C. consumption increases
D. the money price of oil increases
2. When potential GDP increases,
_______.
A. aggregate demand increases
B. aggregate supply increases
C. both aggregate demand and aggregate supply
increase
D. the price level rises
3. The quantity of real GDP demanded...

Which of the following is graphed as a horizontal line across
levels of real GDP in the aggregate expenditures model?
the saving schedule
the investment schedule
the consumption schedule
the investment demand curve
The multiplier effect relates changes in
the price level to changes in real GDP.
the interest rate to changes in investment.
disposable income to changes in consumption.
spending to changes in real GDP.
The multiplier can be calculated by
dividing
one by one minus the marginal propensity...

In A country the consumption function is: C (Y) = 5 +
0.75 Y
The investments are I = 4;
full employment income is YV = 40.
a) How high must government expenditure be for full employment
to be achieved?
b) How high would government transfers to A-land citizens have to
be to achieve the same goal? (Note: a transfer is like a negative
tax, -T)
c) Why is it that the state expenditure is higher for b) than for...

I. Completely answer the following
problems: uses the correct equations to explain
the exercises, please
1. The economy is in equilibrium of full employment at $
825 billion. However, aggregate demand increases causing GDP to be
at the level of $ 1,225 trillion. Note that the economy registers a
PMC = 0.60.
+a. What type of fiscal policy will have to be implemented
(restrictive fiscal policy or expansive fiscal
policy)?
+b. If applying a fiscal policy using only government spending
(G),...

Refer to the table for Moola given below to answer the following
questions.
Money Supply
Money Demand
Interest Rate
Investment at Interest (Rate
Shown)
Potential Real GDP
Actual Real GDP at Interest (Rate
Shown)
$500
$800
3%
$70
$350
$390
500
700
4%
$60
350
370
500
600
5%
$50
350
350
500
500
6%
$40
350
330
500
400
7%
$30
350
310
Instructions: Enter your answers as whole
numbers.
a. What is the equilibrium interest rate in Moola?...

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