Homework Problems
Chapter 3:Problem 2
2. Ca=1500-10r ,c=0.6 ,T=1800
Ip=2400-50r ,G=2000 ,NX=-200
a. The marginal propensity to save equals: 1-C=1-0.6=0.4
b. Autonomous planned spending, Ap, equals Ca − cTa + Ip + G + NX = 1,500 − 10r −.6(1,800) + 2,400 − 50r + 2,000 − 200 = 4,620 − 60r. 4,620 − 60(3) = 4,440.
c. 4,440/.4 = 11,100
d..04(3) = 120 billions.
e. 4,440 – 120 = 4,320. 4,320/.4 = 10,800
f. (10,800 − 11,100)/(4,320− 4,440) = (-300)/(-120) = 2.5
g. 11,095 is the number
a. G increases and tax and interest stay the same. G must go up by 480 billion to put the economy back in equilibrium
b. 480,000,000,000/ -.6 = 800,000,000,000. Congress must decrease taxes by 800 billion
c. Government spending and taxes must go up by 75 billion
d. ?
Chapter 4
#1.
Chapter 8. Problem 1 (a through e)
A.)The equation for aggregate demand is Y = 6,250 + 5,000/P.
Price Level :2.0 ,1.25,|1.0 ,0.8 ,0.5 Aggregate Demand :8,750 ,10,250 ,11,250 ,12,500,16,250
B.) The equation for the short-run aggregate supply curve is Y = 10,250 + 1,000P.
Price Level :2.0 ,1.25 ,1.0 ,0.8 ,0.5 Short-Run Aggregate Supply :12,250 ,11,500 ,11,250 ,11,050,10,750 |
C.) Short-Run Equilibrium Price Level = 1
Short-Run Equilibrium Level of Real GDP = 10,490
Long-Run Equilibrium Price Level = 11,250
Long-Run Equilibrium Level of Real GDP = 1
D.)The equilibrium real wage rate equals 50.
E.)The new equation for the aggregate demand curve is Y = 7,250 + 5,000/P.
Price Level :2.0 ,1.25 ,1.0 ,0.8 ,0.5 Aggregate Demand :9,750 ,11,250,12,250 ,13,500 ,17,250
Chapter 9. Problems 4
6. (7 points) Explain briefly how a change to the following MS, MD, or P (ceteris paribus) would shift the LM function to the right. Include in your discussion whether the variable would have to increase or decrease to cause the rightward LM shift. Discuss which of these the FED exercises control over.
a. MS.
b. MD (money demand).
c. P (price index).
7. (7 points) By how much will GDP change
2. Ca=1500-10r ,c=0.6 ,T=1800
Ip=2400-50r ,G=2000 ,NX=-200
a. The marginal propensity to save equals: 1-C=1-0.6=0.4
b. Autonomous planned spending, Ap, equals Ca − cTa + Ip + G + NX = 1,500 − 10r −.6(1,800) + 2,400 − 50r + 2,000 − 200 = 4,620 − 60r. 4,620 − 60(3) = 4,440.
c. 4,440/.4 = 11,100
d..04(3) = 120 billions.
e. 4,440 – 120 = 4,320. 4,320/.4 = 10,800
f. (10,800 − 11,100)/(4,320− 4,440) = (-300)/(-120) = 2.5
g. 11,095 is the number
a. G increases and tax and interest stay the same. G must go up by 480 billion to put the economy back in equilibrium
b. 480,000,000,000/ -.6 = 800,000,000,000. Congress must decrease taxes by 800 billion
c. Government spending and taxes must go up by 75 billion
d. ?
Chapter 4
#1.
Chapter 8. Problem 1 (a through e)
A.)The equation for aggregate demand is Y = 6,250 + 5,000/P.
Price Level :2.0 ,1.25,|1.0 ,0.8 ,0.5 Aggregate Demand :8,750 ,10,250 ,11,250 ,12,500,16,250
B.) The equation for the short-run aggregate supply curve is Y = 10,250 + 1,000P.
Price Level :2.0 ,1.25 ,1.0 ,0.8 ,0.5 Short-Run Aggregate Supply :12,250 ,11,500 ,11,250 ,11,050,10,750 |
C.) Short-Run Equilibrium Price Level = 1
Short-Run Equilibrium Level of Real GDP = 10,490
Long-Run Equilibrium Price Level = 11,250
Long-Run Equilibrium Level of Real GDP = 1
D.)The equilibrium real wage rate equals 50.
E.)The new equation for the aggregate demand curve is Y = 7,250 + 5,000/P.
Price Level :2.0 ,1.25 ,1.0 ,0.8 ,0.5 Aggregate Demand :9,750 ,11,250,12,250 ,13,500 ,17,250
Chapter 9. Problems 4
6. (7 points) Explain briefly how a change to the following MS, MD, or P (ceteris paribus) would shift the LM function to the right. Include in your discussion whether the variable would have to increase or decrease to cause the rightward LM shift. Discuss which of these the FED exercises control over.
a. MS.
b. MD (money demand).
c. P (price index).
7. (7 points) By how much will GDP change