I need help for my ECON homework

Week 4 assignment

Please submit your answers electronically (to your assignment folder). This assignment is worth 100 points.

Chapter 11: The Aggregate Expenditures Model

1. In the aggregate expenditures model, when total spending rises, then total output and employment (increase, decrease) ________, and when total spending falls, then total output and employment (increase, decrease) _______.

2. If aggregate expenditures are greater than the real domestic output, saving is (greater than, less than) ________ planned investment, there are unplanned (increases, decreases) _______ in inventories, and real GDP will (rise, fall) ________.

3. Taxes tend to reduce consumption at each level of real GDP by an amount equal to the taxes multiplied by the marginal propensity to (consume, save) _______; saving will decrease by an amount equal to the taxes multiplied by the marginal propensity to (consume, save) _______.

4. The amount by which aggregate spending at the full-employment GDP exceeds the full-employment level of real GDP is (a recessionary, an inflationary) _______ expenditure gap. To eliminate this expenditure gap, the aggregate expenditures schedule must (increase, decrease) _______.

Question 5 is based on the following consumption schedule.

Real GDP	C
$200	$200
240	228
280	256
320	284
260	312
400	340
440	368
480	396

5. If real GDP is $275 billion, consumption is $250 billion, and investment is $30 billion, real GDP

A. Will tend to decrease

B. Will tend to increase

C. Will tend to remain constant

D. Equals aggregate expenditures

6. If the investment schedule is $60 at each level of output, the equilibrium level of real GDP will be

A. $320

B. $360

C. $400

D. $440

7. At the equilibrium level of GDP

A. Actual investment is zero

B. Unplanned changes in inventories are zero

C. Saving is greater than planned investment

D. Saving is less than planned investment

Questions 8 and 9 are based on the following table for a private, closed economy. All figures are in billions of dollars.

Real rate of return	Investment	Consumption	GDP
10%	$0	$200	$200
8	50	250	300
6	100	300	400
4	150	350	500
2	200	400	600
0	250	450	700

8. If the real rate of interest is 4%, then the equilibrium level of GDP will be

A. $300 billion

B. $400 billion

C. $500 billion

D. $600 billion

9. An increase in the real interest rate by 4% will

A. Increase the equilibrium level of GDP by $200 billion

B. Decrease the equilibrium level of GDP by $200 billion

C. Decrease the equilibrium level of GDP by $100 billion

D. Increase the equilibrium level of GDP by $100 billion

Questions 10 and 11 refer to the following table. All numbers are in billions.

Real GDP	C + Ig	Net exports
$900	$913	$3
920	929	3
940	945	3
960	961	3
980	977	3
1000	993	3
1020	1009	3

10. The equilibrium real GDP in this open economy is

A. $960

B. $980

C. $1000

D. $1020

11. If net exports are increased by $4 billion at each level of GDP, the equilibrium real GDP would be

A. $960

B. $980

C. $1000

D. $1020

Questions 12 and 13 are based on the following consumption schedule.

Real GDP	C
$300	$290
310	298
320	306
330	314
340	322
350	330
360	338

12. If taxes were $5, government purchases of goods and services $10, planned investment $6, and net exports zero, equilibrium real GDP would be

A. $300

B. $310

C. $320

D. $330

13. If taxes were zero, government purchases of goods and services $10, planned investment $6, and net exports zero, equilibrium real GDP would be

A. $310

B. $320

C. $330

D. $340

14. What does it mean that an economy is private and closed?

15. What is the difference between an investment demand curve and an investment schedule?

Chapter 12: Aggregate Demand and Aggregate Supply

16. The aggregate demand curve shows the quantity of goods and services that will be (supplied, demanded) ________ or purchased at various price levels. For aggregate demand, the relationship between real output and the price level is (positive, negative) ________.

17. List the four factors that may change consumer spending, and thus shift aggregate demand.

18. List two major factors that may change investment spending, and thus shift aggregate demand.

19. For the short-run aggregate supply curve, as the price level increases, real domestic output (increases, decreases) _______, and as the price level decreases, real domestic output (increases, decreases) _______. The relationship between the price level and real domestic output supplied is (positive, negative) _______.

20. If the price level were above equilibrium, the quantity of real domestic output supplied would be (greater than, less than) _______ the quantity of real domestic output demanded. As a result competition among producers eliminates the (surplus, shortage) _______ and lowers the price level.

21. If the price level were below equilibrium, the quantity of real domestic output supplied would be (greater than, less than) _______ the quantity of real domestic output demanded. As a result competition among buyers eliminates the (surplus, shortage) _______ and bids up the price level.

22. An increase in aggregate supply will (increase, decrease) _______ real domestic output and (increase, decrease) _______ the price level. If aggregate demand increased, the price level would (increase, decrease) _______, but a simultaneous increase in aggregate supply (reinforces, offsets) _______ this change and helps keep the price level stable.

Questions 23 through 25 refer to the following aggregate demand-aggregate supply schedule for a hypothetical economy.

Real domestic output demanded (billions)	Price Level	Real domestic output supplied (billions)
$1500	200	4500
2000	175	4000
2500	150	3500
3000	125	3000
3500	100	2500
4000	75	2000

23. The equilibrium price level and quantity of real domestic output will be

A. 150 and $3000

B. 125 and $3000

C. 100 and $3500

D. 100 and $2500

24. If the quantity of real domestic output demanded increased by $2000 at each price level, the new equilibrium price level and quantity of real domestic output would be

A. 200 and $3500

B. 175 and $4000

C. 150 and $3500

D. 125 and $5000

25. Using the original data from the table, if the quantity of real domestic output demanded increased by $1500 and the quantity of real domestic output supplied increased by $500 at each price level, the new equilibrium price level and quantity of real domestic output would be

A. 175 and $3500

B. 175 and $4500

C. 150 and $4000

D. 125 and $3500

26. An increase in aggregate supply will

A. Increase the price level and real domestic output

B. Decrease the price level and real domestic output

C. Decrease the price level and increase the real domestic output

D. Decrease the price level and have no effect on real domestic output

Questions 27 through 32 refer to the following aggregate supply schedule of an economy

(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)
Price level	Real GDP	AD1	AD2	AD3	AD4	AD5	AD6
260	2540	940	1140	1900	2000	2090	2390
240	2490	1040	1240	2000	2100	2190	2490
220	2430	1140	1340	2100	2200	2290	2590
200	2390	1240	1440	2200	2300	2390	2690
190	2350	1390	1590	2250	2350	2540	2740
180	2300	1440	1640	2300	2400	2590	2890
160	2200	1540	1740	2400	2500	2690	2990
140	2090	1640	1840	2500	2600	2790	3090
120	1940	1740	1940	2600	2700	2890	3190
100	1840	1840	2040	2700	2800	2990	3290

27. If the aggregate demand in the economy were columns 1 and 3, the equilibrium real GDP would be _______ and the equilibrium price level would be _______.

28. If aggregate demand should increase to that shown in columns 1 and 4, the equilibrium real GDP would increase to _______ and the price level would be ________.

29. Should aggregate demand be that shown in columns 1 and 5, the equilibrium real GDP would be _______ and the equilibrium price would be _______.

30. If aggregate demand should increase by 100 units to that shown in columns 1 and 6, the equilibrium real GDP would increase to _______ and the price level would rise to _______.

31. If aggregate demand were that shown in columns 1 and 7, the equilibrium real GDP would be _______ and the equilibrium price level would be _______.

32. If aggregate demand increased to that shown in columns 1 and 8, the equilibrium real GDP would be _______ and the price level would rice to _______.

33. Give five reasons why prices in the economy tend to be inflexible in a downward direction.

34. How did the economy simultaneously achieve full employment, economic growth, and price stability between 1996 and 2000?