ECON 2002.01 Lecture Notes - Lecture 18: Output Gap, Microsoft Powerpoint
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GDP | C | Ig | G | X | M |
300 | 250 | 40 | 20 | 30 | 10 |
350 | 290 | 40 | 20 | 30 | 10 |
400 | 330 | 40 | 20 | 30 | 10 |
450 | 370 | 40 | 20 | 30 | 10 |
500 | 410 | 40 | 20 | 30 | 10 |
550 | 450 | 40 | 20 | 30 | 10 |
600 | 490 | 40 | 20 | 30 | 10 |
650 | 530 | 40 | 20 | 30 | 10 |
a). Calculate the MPC, MPS, and the multiplier
b). If full employment GDP is 600:
1). Is there an inflationary gap or a recessionary gap?
2).How much would government spending need to change to bring about the necessary change to return the economy to full employment equilibrium?
3).Alternatively, to a change in G, how much would taxes have to change to bring about the necessary change in to return the economy to full employment equilibrium?
c).If full employment GDP is 350:
1).Is there an inflationary gap or recessionary gap?
2).How much would spending need to change to bring about the necessary change to return the economy to full employment equilibrium?
Assume that the equations below describe the expenditures within a particular macroeconomy and that these equations conform to the assumptions we've made in the lecture regarding the fixed price level Aggregate Expenditure model. All values for expenditure and income are dollar amounts, but for simplicity, we've dropped the $ below.
C = 0.8(DI) + 1000 | C = Consumption expenditure, DI = Disposable Income |
I = 2000 | I = Investment expenditure |
G = 1000 | G = government expenditure |
X = 1600 | X = spending on exports |
M = 1800 | M = spending on imports |
DI = Y - T | Y = real GDP, T = tax revenues/> |
T = 1000 | Ā |
Yp = 12000 | Yp = Potential GDP |
Given the equations above, we can describe the GDP, government budget, and net exports in this economy. Select three characteristics from the list below which accurately describe this economy. Note that there is no partial credit on this question. I.e., your answer will either be all correct, or all wrong.
Ā | a. |
inflationary gap |
Ā | b. |
recessionary gap |
Ā | c. |
no output gap |
Ā | d. |
government budget surplus |
Ā | e. |
government budget deficit |
Ā | f. |
balanced government budget |
Ā | g. |
trade deficit |
Ā | h. |
trade surplus |
Ā | i. |
net exports of zero |