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survey of economics

Questions and Answers of Survey Of Economics

=+b.A fall in the real value of money in the economy due to a higher aggregate price level
=+a. Arise in the interest rate caused by a change in monetary policy
=+Explain whether it represents a movement along the aggregate demand curve (up ‘or down) or a shift of the curve (leftward or rightward).
=+1. Determine the effect on aggregate demand of each of the following events.
=+ How can monetary policy and fiscal policy stabilize the economy?
=+ How is the AD—AS model used to analyze economic fluctuations?
=+Why is the aggregate supply curve different in the short run compared to the long run?
=+How does the aggregate supply curve illustrate the relationship between the aggregate price level and the quantity of aggregate output supplied?
=+How does the aggregate demand curve illustrate the relationship between the aggregate price level and the quantity of aggregate output demanded?
=+. How will ¥* change if autonomous consumer spending falls to $450 billion?Value of | Change in enn MPC | multiplier | spending 05 a ea 06 2 [S55] 2 0.75 2 Pea 2 08 2 |Sese] op> AC= - $2. >
=+c. What is the value of the multiplier?
=+b. Solve for ¥* algebraically.
=+a. Write the expression for planned aggregate spending as in Equation 264-1.
=+2. nan economy without government purchases, transfers, or taxes, and without imports or exports, aggregate autonomous consumer spending is $500 billion, planned investment spending is $250
=+Interactive step-| help with solving this problem can be found online.
=+ How does the value of the multiplier change with the marginal propensity to consume?
=+1. Complete the following table by calculating the value of the multiplier and identifying the change in Y* due to the change in autonomous spending.
=+£ If autonomous consumer spending tises to $200 billion, what will be the new ye AEpianne Tunpiann YD C Ilanned od ed(billions of dollars) $0 | $100 | $300 400 | 400 | 300 800 | 700 | 300 1,200 |
=+e. If planned investment spending falls to $200 billion, what will be the new Y*?
=+d. What is the value of the multiplier?
=+c. What is Y*, income-expenditure equilibrium GDP?
=+b. What is the aggregate consumption function?
=+Assume there is no government or foreign sector in this economy. Complete the table by calculating planned aggregate spending (AEpianned) and unplanned inventory investment (Iunpianned)-
=+a. The accompanying table shows gross domestic product (GDP), disposable income (JD), consumer spending (©), and planned investment spending (planned) in an economy.
=+expenditure curves (AEpjannedi 2nd AEpyanned2) and a 45-degree line to show the effect of the autonomous policy change on the equilibrium.Interactive st help with ing this problem can be found
=+horizontal axis “Real GDP.” Draw two planned aggregate
=+b. Illustrate the effect on real GDP with the use of a graph depicting the income— expenditure equilibrium. Label the vertical axis “Planned aggregate spending, AEpianned” and the
=+a. Calculate the initial change in aggregate consumer spending as a consequence of this policy measure if the marginal propensity to consume (MPC) in the United States is 0.5. Then calculate the
=+was to boost the economy by increasing the disposable income of American consumers.
=+Recovery and Reinvestment Act of 2009) that combined would deliver about $700 billion in government spending. Assume, for the sake of argument, that this spending was in the form of payments made
=+several relief packages (the Economic Stimulus Act of 2008 and the American
=+ 12. The U.S. economy slowed significantly in early 2008, and policy makers were extremely concerned about growth. To boost the economy, Congress passed
=+What effect will their successful attempts have on real GDP?
=+world’s largest debtor nation. We often hear that the problem is the nation’s low savings rate. Suppose policy makers attempt to rectify this by encouraging greater savings in the economy.
=+11. Although the United States is one of the richest nations in the world, it is also the
=+ What is the value of the multiplier? As the marginal propensity to consume increases, what happens to the value of the multiplier?
=+What is the total change in real GDP after 10 rounds?
=+b. Redo the table starting from round 2, assuming the marginal propensity to consume is 0.75.
=+How do your answers to the first and third questions compare?
=+ What would you expect the total change in Y* to be based on the multiplier formula?
=+What is the value of the multiplier?
=+a. What is the total change in real GDP after the 10 rounds?
=+Change in J | Change inr | Change in Y PlannedOt C| eal GDP D Rounds (billions of dollars)1 ee * | $10.00 $10.00 2 AC= $5.00 $5.00 $5.00 3 AC=? 2 2 4 AC=? ? ? 5 AC=? 2 2 6 ACc=? ? ? 7 AC=? 2 2 8
=+filled in for you. In the first row, the increase of planned investment spending of $10 billion raises real GDP and YD by $10 billion, leading to an increase in consumer spending of $5 billion (MPC
=+investment of $10 billion, show the rounds of increased spending that take place by completing the accompanying table. The first and second rows are tion,
=+10. An economy has a marginal propensity to consume of 0.5, and Y*, income— expenditure equilibrium GDP, equals $500 billion. Given an autonomous increase in planned
=+e. If planned investment spending rises to $450 billion, what will be the new Y*?
=+d. What is the value of the multiplier?
=+c. What is Y*, income—expenditure equilibrium GDP?
=+b. What is unplanned inventory investment when real GDP equals $600 billion?
=+a. Plot the aggregate consumption function and planned aggregate spending.
=+consumer spending is $250 billion, planned investment spending is i $350 bi and the marginal propensity to consume is 2/3.
=+9. Inan economy with no government and no foreign sectors, autonomous
=+c. Asizable inflow of foreign funds into the country lowers the interest rate.
=+b. There is a rise in the expected growth rate of real GDP.
=+a. The Federal Reserve raises the interest rate.
=+8. Explain how each of the following actions will affect the level of planned investment spending and unplanned inventory investment. Assume the economy is initially in income—expenditure
=+c. Baby boomers begin to retire in large numbers and reduce their savings, resulting in higher interest rates.
=+b. The U.S. Environmental Protection Agency decrees that corporations must upgrade or replace their machinery in order to reduce their emissions of sulfur dioxide.
=+a. The interest rate falls as a result of Federal Reserve policy.
=+7. How will planned investment spending change as the following events occur?
=+To what extent did the movements in the stock market hurt or help consumer spending?
=+consumer spending after the collapse in the housing market that began in 2006?
=+think the movements in home prices both influenced the growth in real GDP during the first half of the decade and added to the concern about maintaining
=+market experienced similar ups and downs. From March 2003 to October 2007, the Standard and Poor’s 500 (S&P 500) stock index, a broad measure of stock market prices, almost doubled, from 800.73
=+ 6. During the early 2000s, the Case-Shiller U.S. Home Price Index, a measure of average home prices, rose continuously until it peaked in March 2006. From March 2006 to May 2009, the index lost
=+c. GDP at the end of 2014 was $15,982.3 billion. If GDP were to increase by the amount calculated in partb, what would be the percent increase in GDP?
=+Iunpianned, decreased by $100 billion, what is the change in real GDP?
=+b. If there are no other changes to autonomous spending other than the increase in consumer spending in parta, and unplanned inventory investment,
=+a. If the marginal propensity to consume is 0.50, by how much will real GDP change in response?
=+5. The Bureau of Economic Analysis reported that, in real terms, overall consumer spending increased by $345.8 billion in 2015.
=+c. What is the aggregate consumption function?
=+What is the marginal propensity to save?
=+a. Plot the aggregate consumption function for Eastlandia.b. What is the marginal propensity to consume?
=+disposable income did not change. The accompanying table shows the level of aggregate consumer spending and disposable income in millions of dollars for each of these years. Use this information to
=+4. From 2009 to 2014, Eastlandia experienced large fluctuations in both aggregate consumer spending and disposable income, but wealth, the interest rate, and expected future
=+ What is the marginal propensity to consume for the economy?
=+b. What is the economy’s aggregate consumption function?
=+a. What is each resident’s consumption function? What is the marginal propensity to consume for each resident?
=+3. Economists observed the only five residents of a very small economy and estimated each one’s consumer spending at various levels of current disposable income. The accompanying table shows each
=+c. The government increases its purchases of military equipment by $60 billion; the marginal propensity to consume is 0.6.
=+b. Firms reduce investment spending by $40 billion; the marginal propensity to consume is 0.8.
=+a. There is an autonomous increase in consumer spending of $25 billion; the marginal propensity to consume is 2/3.
=+2. Assuming that the aggregate price level is constant, the interest rate is fixed, and there are no taxes and no foreign trade, what will be the change in GDP if the following events occur?
=+Eastlandia Incremental cha Total change in Rounds nge in GDP GDP 1 AC = $40 billion ?2 MPCx C=? ?MPCx MPCx sc 3 =p ?MPCx MPCx MP > 4 ? CxAC=?ToralciepeeinG —(afta- MPC) x4C=?
=+Westlandia and 0.75 in Eastlandia. What do your results indicate about the relationship between the size of the marginal propensity to consume and the multiplier?Westlandia Incremental cha Total
=+there are no taxes and no foreign trade, complete the accompanying tables to show the various rounds of increased spending that will occur in both economies if the marginal propensity to consume is
=+increase in consumer spending in the economies of Westlandia and Eastlandia. Assuming that the aggregate price level is constant, the interest rate is fixed in both countries, and
=+1. Due to an increase in consumer wealth, there is a $40 billion autonomous
=+ 3. How does this story about General Motors help explain how a slump in housing—a relatively small part of the U.S. economy—could produce such a deep national recession?
=+ 2. Why was it reasonable in June 2009 to predict that auto sales would improve in the near future?
=+ 1. Why did a national slump that began with housing affect companies like General Motors?
=+b. Suppose ¥* is originally $500 billion, the autonomous reduction in planned aggregate spending is $300 million ($0.3 billion), and MPC= 0.5. Calculate Y* after such a change.
=+Describe how the economy adjusts to a new income—expenditure equilibrium.
=+2.a, Use a diagram like Figure 26-11 to show what happens when there is an autonomous fall in planned aggregate spending,
=+1 Although economists believe that recessions typically begin as slumps in investment spending, they also believe that consumer spending eventually slumps during a recession. Explain why.
=+ Explain why an inventory overhang might, like the existence of too much production capacity, depress current economic activity
=+3, Consumer spending was sluggish in late 2007, and economists worried that an inventory overhang—a high level of unplanned inventory investment throughout the economy—1===+would make it
=+d. An unanticipated fall in sales
=+c. Asharp increase in the economy’s growth rate of real GDP

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