Question

# Use the table below to answer the following questions Price level Real GDP supplied (short run)...

1. 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
1. Calculate short-run equilibrium and the price level
2. If potential GDP equals 625, what is the gap called and what is the amount of the gap?
3. If potential GDP equals 550, what is the gap called and what is the amount of the gap?

Use the table below to answer the following questions

 Disposable Income (billions) Consumption (billions) Savings (billions) 100 -20 200 200 300 20 400 360 500 440 600 80 700 100
1. Complete the table
1. Graph the consumption schedule and determine the MPC and the MPS
2. Determine the multiplier
3. Assume that consumption increases by 3 billion, use the multiplier to determine the increase in real GDP

A) in short run eqm

Real GDP supplied = real GDP demanded

= 575

So P*= 110

Y*= 575

B) potential GDP = 625

As current GDP is lower than potential level

So it is Recessionary Gap

Gap amount = 625-575

= 50

C) current GDP Y = 575, is more than potential level

So it is inflationary gap

Gap size = 575-550

= 25

D) table

 Yd C S 100 120 -20 200 200 0 300 280 20 400 360 40 500 440 60 600 520 80 700 600 100

Yd = C+S

A)

MPC = ∆C/∆Y

= 80/100

= .8

MPS = .2

B) multilplier m, = 1/(1-MPC)

= 1/.2

= 5

C) ∆C = 3,

m =∆Y/∆C

∆Y = 3*5= 15 billion

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