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    autonomous aggregate demand / short-run output / multiplier

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    Category: Economics > Macroeconomics
    Subject: calculate autonomous aggregate demand / short-run output / multiplier
    Details: C = 350 + 0.75(Y-T) - 200r
    Ip = 200 - 500r
    G = 250, T = 200, NX = 50
    r = 5.75%

    Answer the following questions using the above information. Show workings.
    a) Caluclate autonmous aggregate demand.
    b) Calculate the short-run output.
    c) Calculate the multiplier.
    d) If Y* is 2500 what is the amount of the gap, and what type of output gap is it?
    e) What would the interest rate have to be to eliminate the output gap?

    © BrainMass Inc. brainmass.com March 4, 2021, 5:56 pm ad1c9bdddf
    https://brainmass.com/economics/econometric-models/autonomous-aggregate-demand-short-run-output-multiplier-19141

    Solution Preview

    a) calculate autonomous aggregate demand
    <br>C = 350 + 0.75(Y-T) - 200*5.75% =350 + 0.75(Y-200) - 11.5
    <br>C = 350 + 0.75(Y-T) - 200r =350 + 0.75Y-150 - 200r
    <br>C = 188.5 + 0.75Y
    <br>And I = 200 - 500r =200 - 500*5.75%= 171.25
    <br>
    <br>autonomous aggregate demand is
    <br>AD=C+I+G+NX=188.5 + 0.75Y+171.25+250+50= 659.75 + 0.75Y
    <br>then ...

    Solution Summary

    Calculate autonomous aggregate demand / short-run output / multiplier

    $2.49

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