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Question 1: (1 point)
Assume Smith is temporarily unemployed because he has voluntarily quit his job with Company A and will begin a better job next week with Company B. Smith will be counted as structurally unemployed.
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Question 2: (1 point)
A recession is a decline in total output, employment, and income, and is marked by a widespread contraction in many industries.
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Question 3: (1 point)
The purchase of GM stock is a part of gross, but not of net, investment.
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Question 4: (1 point)
The CPI measures the change in the average price of goods produced domestically.
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Question 5: (1 point)
In a simple two sector model of the economy the slope of the aggregrate expenditure function is the APC (average propensity to consume).
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Question 6: (1 point)
The "recessionary gap" is the amount by which the equilibrium national income exceeds the full-employment income differ.
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Question 7: (1 point)
A decrease in the interest rate will tend to shift the investment schedule to the left.
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Question 8: (9 points)
Using the table below calculate the missing values.
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Year
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Nominal GDP
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Real GDP
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GDP Deflator
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1 (2007)
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2,160
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____________
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75
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2 (2008)
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2,827
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3,505
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____________
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3 (2009)
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3,550
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____________
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100.00
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4 (2010)
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4,474
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3,792
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____________
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5 (2011)
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____________
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4,617
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150
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Enter the missing values: the inflation/growth rates as indicated below.
Inflation rate year 1-2 ____________
Real growth rate yr. 2-3 ____________
Inflation rate year 3-4 ____________
Real growth rate yr. 4-5 ____________
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Question 9: (5 points)
Use the information below to answer the following questions for a two sector economy:
C = 650 + 0.6 Y
I = 40
where: C is consumption
I is investment
Y is Income
AE is aggregate expenditure
Ye is Equilibrium income
The value of consumption when Y=500 is? ____________
What is the value of Ye? ____________
What is the value of the multiplier? ____________
The value of savings when Y=400 is? ____________
What is the value of AE when Y=200? ____________
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Question 10: (9 points)
Using the consumption function below, calculate consumption and savings at each level of income and find break-even income.
Where Y=national product or income
C = 470 + 0.55 Y
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Income(Y)
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Consumption(C)
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Savings(S)
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470
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____________
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____________
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940
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____________
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____________
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1,410
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____________
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____________
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1,880
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____________
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____________
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What is the break-even level of Income? ____________
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Question 11: (14 points)
Complete the following table assuming that (a) MPS = 0.7, (b) there is no government and all saving is personal saving. (mps=marginal propensity to save)
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Level of output and income
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Consumption in
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Saving in
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250
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260
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____________
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275
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____________
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____________
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300
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____________
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____________
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325
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____________
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____________
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350
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____________
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____________
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(a) What is the MPC? ____________
(b) What is the Autonomous Consumption? ____________
Suppose a family's annual disposable income is 5,000 of which it saves 2,700
(c) What is their APC? ____________
(d) If their income rises to 6,500 and they plan to save 3,200, what are their MPS ____________ and MPC? ____________
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jeffpls
assigment_1.docx
