Question

1. How is equilibrium defined in the simple model of GDP? What advantage can economic analysts get from defining the level of equilibrium and then comparing it to the actual level of GDP?
2. What is the major determinant of consumption behavior in the expenditures model of GDP? What is the resulting linear equation for the consumption relationship? Now, draw the consumption function, being sure to mark each axis.
3. Define the MPC end MPS in words, and in mathematics.
4. Assume that the level of autonomous consumption rises. Show in a graph what happens to the consumption function.
5. Assume that the size of the MPC falls. Show in a graph what happens to the consumption function.
6. If the percentage of income saved rises, what, if anything, must happen to the percentage of income spent? Why?
7. With E (expenditures) on the vertical axis, and Y (GDP) on the horizontal axis, draw the function that illustrates the level of planned investment (Ip) in any short-run period of time. With the same axes, what happens to the consumption function once you add planned investment and generate the Ep (in this case, C+Ip) line? Is the slope the same for C+Ip as for C? Why?
8. Where does the money to finance corporate investment come from? If households save more of their income in a given short-run period than firms expected, what automatically (if anything) happens to planned investment? To total investment (planned plus unplanned)?

Solution Preview

This material may consist of step-by-step explanations on how to solve a problem or examples of proper writing, including the use of citations, references, bibliographies, and formatting. This material is made available for the sole purpose of studying and learning - misuse is strictly forbidden.

1. How is equilibrium defined in the simple model of GDP? What advantage can economic analysts get from defining the level of equilibrium and then comparing it to the actual level of GDP?

In the simple model of GDP, equilibrium exists at a point where the planned spending of all the economic agents(who include the households, firms, government, and foreigners) is equal to the real output of the economy which is referred to as RGDP. The advantage of defining the level of planned spending and level of equilibrium and then comparing it with the actual level of GDP would enable the economists to forecast the movements in Y- the output level....

This is only a preview of the solution. Please use the purchase button to see the entire solution

$40.00

or $1 if you
register a new account!

Assisting Tutor

Related Homework Solutions

Recession
Homework Solution
$18.00
Economcs
Recession
Writing
Introduction
Analysis
Conclusion
Macro-Economic
Economics Questions
Homework Solution
$50.00
Business
Economics
Schmeckt Gut
Survey
Energy
Bars
Government
Industry
Tariff
Cause-Effect Relationship
Homework Solution
$123.00
Business
Economics
Cause
Effect
Relationship
Variable
Excel
Scatterplot
Regression
Economics Questions
Homework Solution
$28.00
Business
Economy
Finance
Sales
Global War
Civil Liberties
Corporate Power
Profiteering
Politics
Society
Monetary Costs
Congressional Research Service
US Public Debt
Economics Questions
Homework Solution
$113.00
Business
Economics
Company
Market
Refrigerator
Marginal Costs
Production
Optimal
Price
Elasticity
Markup
Profit
Car Dealership
Flexible
Payments
Credit
Rebate
Supply
Demand
Quantity
Coffee
Milk
Insurance
Breakeven
Get help from a qualified tutor
Live Chats