Economics (Irwin Economics)
21st Edition
ISBN: 9781259723223
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Question
Chapter 31, Problem 7DQ
To determine
Recessionary expenditure gap and Inflationary expenditure gap, which is associated with positive/ negative DGP (Gross Domestic Product ) gap.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Suppose consumption function is specified as C= $200 + 0.75Ya planned investment is $600, net taxes are $400, and
government spending totals $500 of a hypothetical economy in 2020. Find algebraically: LO 3
A. The equilibrium level of aggregate output by equating aggregate output and planned aggregate expenditure.
B. Consumption when aggregate output is at the equilibrium level.
C. Saving when aggregate output is at the equilibrium level.
D. Establish that leakages equal injections at the equilibrium level of aggregate output.
Which of the following changes in personal income tax would lead to the smallest increase in
consumption?
O a.
O b. a $15 000 decrease in taxes, if MPC equals
0.6
O c.
a $30 000 decrease in taxes, if MPC equals
0.25
Oe.
a $20 000 decrease in taxes, if MPC equals
0.5
O d. a $12 000 decrease in taxes, if MPC equals
0.75
a $10 000 decrease in taxes, if MPC equals
0.2
Refer to the table. Equilibrium GDP is:
Government
Purchases
Consumption (after
taxes)
$-20
Gross Investment
Net Exports
Real GDP
$15
$10
10
$+5
$0
0.
+5
15
10
20
10
+5
15
40
40
10
+5
15
70
60
10
+5
15
100
80
10
+5
15
130
100
10
+5
15
160
$40.
O $70.
O $100.
O $130.
$160
O O O O O
Chapter 31 Solutions
Economics (Irwin Economics)
Ch. 31.2 - Prob. 1QQCh. 31.2 - Prob. 2QQCh. 31.2 - Prob. 3QQCh. 31.2 - Prob. 4QQCh. 31.7 - Prob. 1QQCh. 31.7 - Prob. 2QQCh. 31.7 - Prob. 3QQCh. 31.7 - Prob. 4QQCh. 31 - Prob. 1DQCh. 31 - Prob. 2DQ
Ch. 31 - Prob. 3DQCh. 31 - Prob. 4DQCh. 31 - Prob. 5DQCh. 31 - Prob. 6DQCh. 31 - Prob. 7DQCh. 31 - Prob. 8DQCh. 31 - Prob. 1RQCh. 31 - Prob. 2RQCh. 31 - Prob. 3RQCh. 31 - Prob. 4RQCh. 31 - Prob. 5RQCh. 31 - Prob. 6RQCh. 31 - Prob. 7RQCh. 31 - Prob. 8RQCh. 31 - Prob. 9RQCh. 31 - Prob. 1PCh. 31 - Prob. 2PCh. 31 - Prob. 3PCh. 31 - Prob. 4PCh. 31 - Prob. 5PCh. 31 - Prob. 6PCh. 31 - Prob. 7PCh. 31 - Prob. 8PCh. 31 - Prob. 9PCh. 31 - Prob. 10P
Knowledge Booster
Similar questions
- What is the initial change in consumption if an economy's MPC is 0.75 and there is a decrease in taxes of $1 billion? O $1.75 billion O $1 billion O $1.33 billion O $0.75 billionarrow_forwardQUESTION 14 Assuming that the "equilibrium income" is $4,000 and the "full-employment" income is $8,000, which means a recessionary gap of $4,000, how much tax cut is needed to fill the gap if MPC is 0.50? O $7,000 O $5,000 O $3,000 O $4,000arrow_forward/se estion 5 Suppose you were looking at an economy where the consumption function is; C = 50 +0.75Y And you know that investors want to spend 500 at every level of income. In other words 1-500 a. What is the equilibrium level of income? b. If the full - employment level of income is 2000, is there a recessionary gap? If so, how large is the gap? c. What will happen to the equilibrium level of income if investors become pessimistic about the country's future and reduce their investment to 400? d. Is there an inflationary or recessionary gap now? How large? marks) Format Tools Table TV- BIU AV V T²v / povarrow_forward
- Change in business inventories Compensation of employees Corporate profits Durable goods Exports Social Security taxes Transfer payments Fixed investment Government spending Imports Net interest Nondurable goods Personal taxes Rental income Services In Exhibit 5-10, compute personal income (PI). Which of the following is correct? O $7,110 billion. O $7,410 billion. $6,740 billion. $7,760 billion. $6.780 billion. 50 5,400 700 600 100 360 300 950 800 150 500 2,000 1,000 200 4,000arrow_forward7 Real expenditure in thousands of dollars 6 5 3 2 0 1 Reference: Figure 10-5 O 0.25 O.0.50 2 O 0.75 Refer to the graph above. The mpe equals: O 1.00 3 4 5 6 7 Real income in thousands of dollars AE curvearrow_forward4. Below is a list of domestic output and national income figures for a certain year. All figures are in billions. The questions that follow ask you to determine the major national income measures by both the expenditures and income approaches. The results you obtain with the different methods should be the same. LO7.4 Personal consumption expenditures $245 7. Net foreign factor income 4 Transfer payments 12 Rents 14 Consumption of fixed capital (depreciation) 27 Statistical discrepancy 8. Social Security contributions 20 Interest 13 Proprietors' income 33 Net exports 11 Dividends 16 Compensation of employees 223 Taxes on production and imports 18 Undistributed corporate profits 21 Personal taxes 26 19 Corporate income taxes 56 Corporate profits 72 Government purchases 33 Net private domestic investment 20 Personal saving a. Using the above data, determine GDP by both the expenditures approach and the income approach. Then determine NDP. b. Now determine NI in two ways: first, by…arrow_forward
- A lumber mill in BC, Canada cut Canadian trees into softwood lumber, which it then exports to US. If the trees were cut last year, but ended in inventory only to be sold this year for 322715 $, what is the effect on the components of Canadian GDP on the expenditure side in THIS year? O a. None of the answers offered are accurate. O b. $322715.00 increase in exports only O c no change in exports this year, since they were cut last year O d. consumption increases by $322715.00 and so do exports O e. $322715.00 increase in exports and $322715.00 decrease in investment. ionarrow_forwardIf real GDP is $2200 billion, the GDP deflator is 110, nominal net exports are $100 billion, nominal investment is $200 billion, and nominal government expenditures are $400 billion, what is nominal consumption? 1) $1300 2) $1500 3) $1520 O 4) $1720arrow_forwardStill with the same data on Macroland, a closed economy with no government sector, and with fixed price level and interest rate. Fill-in the blank in the following table, then answer the following question. GDP Yd Iplanned lunplanned 20 22 30 50 30 80 30 100 70 30 The Macroland's government reduced its taxes by 20, the income- expenditure equilibrium is expected to be: O 50 O 80 O 100 O 150arrow_forward
- LAST WORD What is Say's law? How does it relate to the view held by classical economists that the economy generally will operate at a position on its production possibilities curve? Use production possibilities analysis to demonstrate Keynes's view on this matter.arrow_forward1. Aggregate expenditures and income The following table shows consumption (C), investment (1), government spending (G), and net exports (X-M) in a hypothetical economy for various levels of real GDP (Y). Assume that the price level remains unchanged at all levels of income. All figures are in billions of dollars. Compute aggregate expenditures for each income level and fill in the last column In the following table. Y с G 500 525 250 150 600 550 250 150 575 250 150 600 250 150 -200 900 625 250 150 -200 700 800 AL AGGREGATE EXPENDITURES (Billions of dollars) The following graph shows real GDP on the horizontal axis and aggregate expenditures (AE) on the vertical axis. The orange line (square symbols) represents a 45-degree (Y-AE) line. 1000 Use the blue points (circle symbol) to plot the aggregate expenditures line for this economy. Line segments will automatically connect the points. 900 300 I 700 X-M Aggregate Expenditures -200 725 -200 750 775 800 825 600 500 + -200 AE line *+…arrow_forwardNational Income 100 200 300 400 500 600 O 104 324 O374 This is a table for Keynesian cross diagram. 540 After-tax income Consumption 104 I+G+X below gives the data necessary to make a Keynesian cross diagram. Assume that the tax rate is 0.4 of national income, the MPC out of after-tax income is 0.9, investment is 58, government spending is 60, exports are 40, and imports are 0.1 of after-tax income. What does consumption equal when income equals 600? Minus Imports Aggregate Expenditures The chartarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Principles of Economics (12th Edition)EconomicsISBN:9780134078779Author:Karl E. Case, Ray C. Fair, Sharon E. OsterPublisher:PEARSONEngineering Economy (17th Edition)EconomicsISBN:9780134870069Author:William G. Sullivan, Elin M. Wicks, C. Patrick KoellingPublisher:PEARSON
- Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage LearningManagerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage LearningManagerial Economics & Business Strategy (Mcgraw-...EconomicsISBN:9781259290619Author:Michael Baye, Jeff PrincePublisher:McGraw-Hill Education
Principles of Economics (12th Edition)
Economics
ISBN:9780134078779
Author:Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:9780134870069
Author:William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...
Economics
ISBN:9781259290619
Author:Michael Baye, Jeff Prince
Publisher:McGraw-Hill Education