An increase in mpc in the Keynesian income expenditure model leads to a. a change of the slope of aggregate demand (expenditure) Curve o. a weaker goods market multiply efficiency c. a shift of the aggregate demand (expenditure) curve d. increase in the price level
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- The Expenditure multiplier occurs because A. a change in autonomous expensitures changes household incomes B) a change in autonomous expensitures causes real GDP to change in the opposite dirrection C) a change in households incomes changes autonomous expensitures D) any change in real GDP must also change the price level E) goverment expenditure on goods and services change by a proportional amount to government taxes7. Suppose in the Simple Keynesian model that the marginal propensity to consume is b = 0.75. If both taxes, T, and government spending, G, are increased by $400, then equilibrium Y O decreases by $1,200. increases by $1.600. increases by $400. neither increases nor decreases. none of the other options.n the Keynesian cross model, assume that the consumption function is given by C = 110 + 0.75(Y - T). Planned investment is 300; government purchases is 350. Assume a balanced budget. a. Graph planned expenditure as a function of income.b. What is the equilibrium level of income?c. If government purchases increase to 400, what is the new equilibrium income? What is the multiplier for government purchases? Solve D and Ed. What level of government purchases is needed to achieve an income of 2,200? (Taxes remain unchanged.)e. What level of taxes is needed to achieve an income of 2,200? (Government purchases remain at 350.)
- QUESTION 3 Give a hypothetical numerical example to show the relationship between the marginal propensity to consume (MPC) and the multiplier (m)? a. b. Considering both the simple Keynesian and the aggregate demand-supply frameworks, if households as a group experience a decrease in wealth at a given price level, what happen to Total Expenditure (TE), Aggreggate Demand (AD) and Real GDP. Illustrate and explain the change using a suitable graph.Question 1. Use the Keynesian cross to predict the impact on equilibrium GDP of a. An increase in government spending b. An increase in taxes c. An equal increase in both government spending and taxesO Macmillan Learning The graph shows the income-expenditure model for the country of Desireland, where AE represents aggregate expenditure. The Desirish government wants to stimulate the economy owing to a slowdown in economic activity and, as such, decides to increase infrastructure spending by $7.65 billion. Show the impact of this extra spending given a marginal propensity to consume (MPC) of 0.7 and a total tax take of 30%, for any changes in GDP. In this example, assume that there is no international trade or inflation, and that interest rates are fixed. Planned aggregate spending (in billions of dollars) 70 65 60 55 50 45 40 35 30 25 20 15 10 5 0 0 01- 5 10 15 20 25 30 35 40 45 50 Real GDP (in billions of dollars) 45 degree line A new socialist government is elected to Desireland and decides to increase direct spending even more, to total of $9.7 billion. What will be the total change in real GDP? Please provide the answer to the nearest whole billion. Planned AE 55 60 65 70…
- n the Keynesian cross, assume that the consumption function is given byC = 200 + 0.75 (Y - T).Planned investment is 100; government purchasesand taxes are both 100.a. Graph planned expenditure as a function ofincome.b. What is the equilibrium level of income?c. If government purchases increase to 125, whatis the new equilibrium income?d. What level of government purchases is neededto achieve an income of 1,600?THE AGGREGATE EXPENDITURE MODEL (IN THE SHORT RUN)YOU MUST SHOW YOUR CALCULATIONS IN THE SPACE BELOWFOR THE NEXT PROBLEM USE THE FOLLOWING FORMULA:CHANGE IN GDP = [ 1 / (1-MPC) ] * CHANGE IN GInitially, the economy is producing $13 trillion in goods and services and the government is spending $2 trillion.Then the government decides to increase its spending to $2.7 trillion. Compute the new equilibrium level of output. Assume that the marginal propensity to consume is 0.7 (MPC=0.7).QUESTION 8 Refer to the diagram. If the full-employment level of GDP is B and aggregate expenditures are at AE1, the: AE, th AE, AE, f k A B GDP recessionary expenditure gap is BC. O recessionary expenditure gap is ed. inflationary expenditure gap is BC. inflationary expenditure gap is zero. inflationary expenditure gap is ei. Aggregate Expenditures
- An inflationary gap is the amount by which aggregate expenditures ____ the amount required to achieve full-employment equilibrium GDP. A) exceed B) equal C) fall short of D) are greater than.f the marginal propensity to consume is 0.75 and the federal government decreases spending by $200 billion the income-expenditure model predicts that real GDP will fall by: $750 billion $150 billion $1000 billion $800 billion1.The marginal propensity to consume in this economy is 2.The equilibrium level of output in this economy is