Microeconomics McConnell, Brue and Flynn

Problems Chapter 11 - The Aggregate Expenditures Model / Page 241

I just like to have my answers reviewed, I am not the best with math or equations.

2. Using the consumption and saving data in problem 1 and assuming investment is $16 billion, what are saving and planned investment at the $380 billion level of domestic output? What are saving and actual investment at that level? What are saving and planned investment at the $300 billion level of domestic output? What are the levels of saving and actual investment? In which direction and by what amount will unplanned investment change as the economy moves from the $380 billion level of GDP to the equilibrium level of real GDP?From the $300 billion level of real GDP to the equilibrium level of GDP?

$380 billion level, saving = $24 billion

planned investment = $16 billion

Actual saving = $24 billion

actual investment is $24 billion

$300 billion level, saving = $8 billion

planned investment = $16 billion

Actual saving = $8 billion

actual investment is $8 billion

Unplanned inventories fall -8 billion

Unplanned inventories rise 8 billion

6. Assume that, without taxes, the consumption schedule of an economy is as follows:

(a) MPC = 0.8

(b) Multiplier without taxes = 5

Consumption after Tax = $112, 192, 272, 352, 432, 512, 592

MPC after tax = 0.8

Multiplier after tax = 5

9. Refer to the accompanying table in answering the questions that follow:

242 PART FOUR Macroeconomic Models and Fiscal Policy real output produced (Y) is equal to aggregate experdianes: Y = C+1+X. L011.7 ha a. Calculate the equilibrium level of income or real GDP for in this economy. 1 ga b. What happens to equilibrium Y if I, changes to 10? What b. Wi does this outcome reveal about the size of the multiplier? exp 9. Refer to the accompanying table in answering the questions bil that follow: LO11.8 col (1) (2) (3) gap Possible Levels Real Domestic Aggregate Expenditures C. As of Employment, Output, ( Ca+lat X + G), exp Millions Millions Millions are 90 $500 $520 10. Answe 100 550 560 expend 110 600 600 a. If C 120 650 eco 640 130 700 b. If re 680 is $ GDI a. If full employment in this economy is 130 million, will c. Sup there be an inflationary expenditure gap or a recessionary an e expenditure gap? What will be the consequence of this gap? G is