| Question | What assumptions cause the immediate-short-run aggregate supply curve to be horizontal? Why is the long-run aggregate supply curve vertical? Explain the shape of the short-run aggregate supply curve. Why is the short-run curve relatively flat to the left of the full-employment output and relatively steep to the right? |
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| Subject | business-economics |
Order the answer to: What assumptions cause the immediate-short-run aggregate supply
Order the answer to: Distinguish between “real-balances effect” and “wealth effect,”
| Question | Distinguish between “real-balances effect” and “wealth effect,” as the terms are used in this chapter. How does each relate to the aggregate demand curve? |
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| Subject | business-economics |
Order the answer to: Why is the aggregate demand curve downsloping? Specify how your
| Question | Why is the aggregate demand curve downsloping? Specify how your explanation differs from the explanation for the downsloping demand curve for a single product. What role does the multiplier play in shifts of the aggregate demand curve? |
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| Subject | business-economics |
Order the answer to: What is Say’s law? How does it relate to the
| Question | 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 (Chapter)? Use production possibilities analysis to demonstrate Keynes’ view on this matter. |
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| Subject | business-economics |
Order the answer to: Answer the following questions, which relate to the aggregate ex
| Question | Answer the following questions, which relate to the aggregate expenditures model: a. If Ca is $100, Ig is $50, X n is –$10, and G is $30, what is the economy’s equilibrium GDP? b. If real GDP in an economy is currently $200, Ca is $100, Ig is $50, X n is –$10, and G is $30, will the economy’s real GDP rise, fall, or stay the same? c. Suppose that full-employment (and full-capacity) output in an economy is $200. If Ca is $150, Ig is $50, Xn is – $10, and G is $30, what will be the macroeconomic result? |
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| Subject | business-economics |
Order the answer to: Assume that the consumption schedule for a private open economy
| Question | Assume that the consumption schedule for a private open economy is such that consumption C = 50 + 0.8Y. Assume further that planned investment Ig and net exports X n are independent of the level of real GDP and constant at I g = 30 and Xn = 10. Recall also that, in equilibrium, the real output produced (Y) is equal to aggregate expenditures: Y = C + Ig + Xn. a. Calculate the equilibrium level of income or real GDP for this economy. b. What happens to equilibrium Y if Ig changes to 10? What does this outcome reveal about the size of the multiplier? |
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| Subject | business-economics |
Order the answer to: Refer to the table on the next page in answering
| Question | c. Assuming that investment, net exports, and government expenditures do not change with changes in real GDP, what are the sizes of the MPC, the MPS, and themultiplier? |
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| Subject | business-economics |
Order the answer to: Refer to columns 1 and 6 in the table for
| Question | Refer to columns 1 and 6 in the table for question 9. Incorporate government into the table by assuming that it plans to tax and spend $20 billion at each possible level of GDP. Also assume that the tax is a personal tax and that government spending does not induce a shift in the private aggregate expenditures schedule. Compute and explain the change in equilibrium GDP caused by the addition of government. |
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| Subject | business-economics |
Order the answer to: Explain graphically the determination of equilibrium GDP for a p
| Question | Explain graphically the determination of equilibrium GDP for a private economy through the aggregate expenditures model. Now add government purchases (any amount you choose) to your graph, showing its impact on equilibrium GDP. Finally, add taxation (any amount of lump-sum tax that you choose) to your graph and show its effect on equilibrium GDP. Looking at your graph, determine whether equilibrium GDP has increased, decreased, or stayed the same given the sizes of the government purchases and taxes that you selected. |
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| Subject | business-economics |
Order the answer to: Assume that, without taxes, the consumption schedule of an econo
| Question | Assume that, without taxes, the consumption schedule of an economy is as follows: GDP, Consumption, Billions Billions $100 ………. $120 200 ………. 200 300 ………. 280 400 ………. 360 500 ………. 440 600 ………. 520 700 ………. 600 a. Graph this consumption schedule and determine the MPC. b. Assume now that a lump-sum tax is imposed such that the government collects $10 billion in taxes at all levels of GDP. Graph the resulting consumption schedule and compare the MPC and the multiplier with those of the pretax consumption schedule. |
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| Subject | business-economics |
