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?

Q8.1 Demand Side Equilibrium & Multiplier
Consider an economy with the following characteristics (in $ billion):
C = 60 + 0.8Yd (where Yd = disposable income)
t = 0.2
I = 40
G = 30

Assume the simple spending multiplier equals 10. Determine the size and direction of any shifts in the aggregate expenditure line, the level of real GDP demanded, and the aggregatedemand curve for each of the following changes in autonomous spending:
a. Autonomous spending rises by $8 billion.
b. Autonomous spending falls b

The question asked that suppose that the Organization of Petroleum Exporting Countries raises oil prices by 50 percent in 2005. What effect will thishave on the U.S. Aggregatedemand curve? On the U.S. Short-runaggregate supply curve?

Graphically illustrate short run supply. Also include on your graph the long-run aggregate supply curve. At what point must the short-runaggregate supply curve and the long-run aggregate supply curve intersect?

Problem No. 1 - Multiplier Computation
Compute the expenditure multiplier and tax multiplier if the MPC is
1. 0.80
2. 0.60
3. 0.90
Problem No. 2 - Changes to National Income (Y)
Suppose that there is a policy goal to increase national income $100 billion. Using the multipliers computed in Problem No. 1, determine

Please see attached.
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2. (A Change in Autonomous Spending) Suppose that when aggregateoutput equals zero, consumption equals $100 billion, autonomous investment equals $200 billion, government purchases equal $50 billion, and net exports equal $50 billion. Suppose also that MPC is 0.9 and MPM is 0.1.
a) Construct a t

The figure illustrates the components of aggregate planned expenditure on Turtle Island. Turtle Island has no imports or exports, the people of Turtle Island pay no income taxes, and the price level is fixed.
a. Calculate autonomous expenditure.
b. Calculate the marginal propensity to consume.
c. What is aggregate planned e

Assume the following equations (in billions of dollars) describe a hypothetical economy where both the price level and interest rates are fixed.
C=110 + 0.75(YD)
YD= Y - NT
NT = 0.2Y
I = 175
G = 80
EX = 70
IM = 30 + 0.1Y
*NOTE: NT means net taxes. YD means disposable income.
i) What is the equilibrium level of in

PLEASE GIVE FULL EXPLANATION
1- distinguish between short-run and long-run aggregate supply. what is the short run?
what assumption is critical to the development of the short run aggregate supply curve as distinct from the long run aggregate supply curve? Explain