Please do fast and solve all parts with correct answer and proper explanation Consider the Economy using the Aggregate Demand (AD) and Aggregate Supply (AS). MPC is theMarginal Propensity to Consume, The RR is the Required Reserves. The MPC is 0.75; The RR is 10% Thefull employment equilibrium GDP is 900.Price LevelAD1800ASReal GDPUsing the spending multiplier calculate the amount of change in government spending that would bringthis economy to full employment. Show the change.Part 2 (Part 1 Continued) Monetary Policy_(5 Points)The Money Supply is 400. Money Demand (MD) = 200 - 625r +0.75 Y and theMoney Supply (MS) = 400. Equilibrium is where MD = MS, thus the equation to solve for the interestrate is 400 = 200 - 625r +0.75 Y. Recall Real GDP is 800 before the fiscal policy action.Note: Y is Real GDP; r is the interest rate.i.Calculate the interest rate when GDP is 800. (when MD = MS)ii.Calculate the MD when Y = 900 at the current interest rate.iii.What is the change in MD when Y increases from 800 to 900?iv.Using the RR, by how much will the Federal Reserve need to increase the Money Supply tokeep the interest rate at the current level?

Aggregate demand(AD):When the total number of consumers have the desire to buy something at the…

Answered: Consider the Economy using the…

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter11: Fiscal Policy

Section: Chapter Questions

Problem 1.4P

See similar textbooks

Similar questions

pls answer urgent all question Q1,a,b,c . Q1-Suppose the government reduces taxes by $20 billion, that there is no crowding out, and that the marginal propensity to consume is ¾. a. What is the initial effect of the tax reduction on aggregate demand? b. What additional effects follow this initial effect? What is the total effect of the tax cut on aggregate demand? c.How does the total effect of this $40billion tax cut compare to the total effect of a $40 billion in governmentpurchases? Why?
A decrease in government purchases of $2 billion leads to an initial $1.1 billion decrease in withdrawals. a. In this case MPW is MPC is ,and the spending multiplier in this economy is Enter your responses for marginal propensities and multiplier values rounded to 2 decimal places. b. With this change in government purchases the AD curve shifts to the (OClick to select) v by $ of the curve shift rounded to1 decimal place. Do not put a minus sign in your answer. billion. Enter your response for the size C. As a result of this shift the equilibrium price level will (Click to select) v and equilibrium real output will (Click to select) v
Suppose MPC equals 0.9, government taxes 30% of all incomes, and the marginal propensity to import equals 0.07. The economy's real GDP is currently $5,454 billion while its potential real GDP is $6,000 billion. Glven a horizontal SRAS curve, what change in government spending on goods and services would bring the economy to full employment real GDP? When doing the calculations, round the value for the multiplier to 2 decimal places, and round your final value for the change in G to the nearest billion.
uèstion 21 pounts The economy is in a recession. The government enacts a policy to increase the real GDP by $10 billion. The MPS is 0.2. Assuming that the agggregate supply curve is horizontal across the range of GDP being considered, by how much should the government change spending or taxes in order to achieve its objective? Show your calculations. e For the toolbar, press ALT+F10 (PC) or ALT+FN+F10 (Mac). BIUS Paragraph Arial 10pt A v x X, Re v 55 OWORDS POWERED 図田 lili 用

Use the information in the following table to answer the questions below. Assume you are dealing with short-run aspects of the economy, so the marginal propensity to consume is constant. Also, for simplicity, assume this economy has no taxes. In your answers, expain brifly how did you get the numerical result. Real GDP Consumption PlannedInvestment GovernmentPurchases Net Exports $9,000 $7,800 $1,500 $1,000 -$700 $10,000 $8,600 $1,500 $1,000 -$700 $11,000 $9,400 $1,500 $1,000 -$700 $12,000 $10,200 $1,500 $1,000 -$700 $13,000 $11,000 $1,500 $1,000 -$700 $14,000 $11,800 $1,500 $1,000 -$700 (a) What is the equilibrium level of real GDP in this economy? (b) Compute the marginal propensity to consume. (c) Compute the government expenditures multipler. (d) Suppose net export increases by $400 (Assuming MPC, Gevernment Purchases, and Planned Investment are the same). What will be the new equilibrium level of GDP? Consumption?
Use the information in the following table to answer the questions below. Assume you are dealing with short-run aspects of the economy, so the marginal propensity to consume is constant. Also, for simplicity, assume this economy has no taxes. In your answers, expain brifly how did you get the numerical result. Real GDP Consumption PlannedInvestment GovernmentPurchases Net Exports $9,000 $7,800 $1,500 $1,000 -$700 $10,000 $8,600 $1,500 $1,000 -$700 $11,000 $9,400 $1,500 $1,000 -$700 $12,000 $10,200 $1,500 $1,000 -$700 $13,000 $11,000 $1,500 $1,000 -$700 $14,000 $11,800 $1,500 $1,000 -$700 Suppose net export increases by $400 (Assuming MPC, Gevernment Purchases, and Planned Investment are the same). What will be the new equilibrium level of GDP? Consumption?
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
Derive the consumption function and use this relation in the aggregate demand function to derivean equation for the equilibrium in the goods market . Why the AD line is upward sloping?Suppose the government spending falls by 100 and in this case marginal propensity to consumeis 0.8. what is the value of change in output. Draw a diagram to show the shift in AD line due tothis change in government spending and output.
Help The aggregate demand curve can be derived from the aggregate expenditures model as indicated by the fact that Multiple Choice an increase in the price level shifts the aggregate expenditures schedule upward and increases real GDP a decrease in the price level shifts the aggregote expenditures schedule downward and decreases real GDP a decreose in the price level shifts the aggregate expenditures scheduie upiward and decreases real GDP an increase in the price level shifts the eggregate expenditures schedule downverd and decreases real GDP
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.
19. Which of the following statements concerning Keynesian analysis are true? Select one: a. Keynes's analysis started with the recognition that the total quantity demanded of an economy's output was the sum of three types of spending: consumer expenditure, planned investment spending, and government spending. Ob. Keynes recognized that equilibrium would occur in the economy when planned expenditure equals Actual expenditure O c All of the above are true. d. Keynes's analysis involves explaining why aggregate output is at a certain level by understanding what factors affect each component of aggregate demand and how the sum of these components could add up to an output smaller or greater than the economy is capable of producing
Figure 25-4 45 Potential GDP Real GDP In Figure 25-4, which expenditure level will result in a recessionary gap? O There will be no deflationary gap. Real Expenditures

SEE MORE QUESTIONS

Recommended textbooks for you

ECON MACRO

Economics

ISBN:

9781337000529

Author:

William A. McEachern

Publisher:

Cengage Learning

Macroeconomics: Principles and Policy (MindTap Co…

Economics

ISBN:

9781305280601

Author:

William J. Baumol, Alan S. Blinder

Publisher:

Cengage Learning

MACROECONOMICS

Economics

ISBN:

9781337794985

Author:

Baumol

Publisher:

CENGAGE L

ECON MACRO

Economics

ISBN:

9781337000529

Author:

William A. McEachern

Publisher:

Cengage Learning

Macroeconomics: Principles and Policy (MindTap Co…

Economics

ISBN:

9781305280601

Author:

William J. Baumol, Alan S. Blinder

Publisher:

Cengage Learning

MACROECONOMICS

Economics

ISBN:

9781337794985

Author:

Baumol

Publisher:

CENGAGE L

Exploring Economics

Economics

ISBN:

9781544336329

Author:

Robert L. Sexton

Publisher:

SAGE Publications, Inc

SEE MORE TEXTBOOKS