Pages: 5 (792 words) Published: March 20, 2013
1(a)
Qd=60-2P
Qs=3P
|Price |Quantity Demanded |　 |Quantity Supplied | |\$30 |0 | |90 | |\$25 |10 | |75 | |\$20 |20 | |60 | |\$15 |30 | |45 | |\$10 |40 | |30 | |\$5 |50 | |15 | |\$0 |60 |　 |0 |

1(b)
Qd=Qs
60-2P=3P
60=5P
P=12

Qs=3P
Qs=3(12)
Qs=36

Equilibrium price \$12 and equilibrium quantity is 36.

1(c)
Qd=60-2P
Qd=60-2(20)
Qd=60-40
Qd=20
The number of units that will be traded are 20

1(d)
Yes, this is an increase in demand
Qd=80-2P

|Price |Quantity Demanded |New Quantity Deamanded |　 |Quantity Supplied | |\$30 |0 |20 | |90 | |\$25 |10 |30 | |75 | |\$20 |20 |40 | |60 | |\$15 |30 |50 | |45 | |\$10 |40 |60 | |30 | |\$5 |50 |70 | |15 | |\$0 |60 |80 |　 |0 |

When the demand equation changed to Qd=80-2P there are increase in demand also there will have a new equilibrium price and quantity 1(e)
Qd=Qs
80-2P=3P
80=5P
P=16

Qs=3P
Qs=3(16)
Qs=48

New equilibrium price \$16 and equilibrium quantity is 48
2(a)
I agree with this statement. The government is shifting from a contractionary fiscal policy to expansionary fiscal policy. According to the deficit of government budget, it requires a higher aggregate output (outcome) to cover the loss by increasing planned government purchase or reducing tax to stimulate economy which is called expansionary fiscal policy.

4a)
Y=C+I+G
Yd=Y-T
Y=160+0.6(Y-100)+150+150
Y=460+0.6Y - 60
Y=400+0.6Y
Y= 400-0.6Y
0.4Y=400
Y=400/0.4
Y= 1000
The equilibrium GDP is 1000.

b)
Yd = Y - T
Yd = 1000-100
Yd = 900
The disposable income is 900.

c)
C = 160 + 0.6Yd
C = 160 + 0.6(900)
C =  160 + 540
C = 700
The consumption spending is 700.

d)
If the full-employment national income is 2400, but now the equilibrium GDP is 1000, so the government expenditure needs to increase in order to achieve the full-employment level. Econ

2a
I agree with the statement. The government is shifting from a contractionary fiscal policy to expansionary fiscal policy. To cope with the deficit of government budget, it requires a higher aggregate output (outcome) to cover the loss by increasing planned government purchase or reducing tax to stimulate economy which is called expansionary fiscal policy.

2b
Crowding-out effect
An increase in government purchase (goods markets ) from G0 to G1 shifts the planned aggregate expenditure curve upward. The increase in Y causes the demand for money to rise, which results in a disequilibrium in the money market. The excess demand for money raises the Interest rate, causing planned investment (I) to decrease. The fall in investment pulls the planned aggregate expenditure curve back down.

P. 578 figure 27.4

2c
The aggregate demand curve is not a market demand curve, and it is not the sum of all market demand curves in the...