Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134078779
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 24, Problem 1.2P
Subpart (a):
To determine
Subpart (b):
To determine
Subpart (c):
To determine
Effect of cutting government purchases in the economy.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Businesses in the nation of Islandia have been accumulating cash because they have a pessimistic outlook of the national economy. Recent changes in the economic outlook of Islandia have caused business leaders to begin to invest some of their accumulated cash. Suppose that businesses in the country invest a total of $40 billion of this cash.
Instructions: Enter a positive number to show an increase and a negative number to show a decrease.
a. What would be the maximum expected change in GDP if Islandia's marginal propensity to consume (MPC) is 0.75?
$ billion
b. Suppose that the recent economic outlook in the country of Mountainia has been the opposite. Businesses have postponed planned investments and have begun to accumulate cash. If businesses in Mountainia postpone $12 billion of their planned investments, what would be the maximum expected change in GDP if its marginal propensity to save (MPS) is 0.05?
$ billion
Question 31
5 points
Save Answ
In year 2018, the government of Qatar spent is 143 billion Qatari Riyal (the national currency of Qatar). The GDP of Qatar in the same year is 1,121 billion Qatari Riyal. Qatar's desired
consumption and desired investment during the year can be summarized by the following equations:
cd
= 1,000 – 5,000r,
||
/d = 800 – 3000r,
%3D
cd
is the desired consumption in billions of Qatari Riyal, 7º if the desired investment in billions of Qatari Riyal, and r is the real interest rate in decimal form.
where
What is the equilibrium real interest rate, r*, in %? Round your answer to at least 2 decimal places. (E.g. 12.3456% should be entered as 12.35)
Suppose your annual income is $73,000 this year and it
is expected to increase 30% next year. The market
interest rate is 4%. a. a.)Please illustrate all possible
consumption patterns with a figure. Do not forget to
label your axes. b.) You believe that your consumption
this year and your consumption next year should be the
same. If you follow your plan and consume equally in
those two years, how much should you save or borrow
this year?
Chapter 24 Solutions
Principles of Economics (12th Edition)
Knowledge Booster
Similar questions
- Consider an economy described by the following equations:Y=C + I +GY=7,000G=4000T=2,000C=150+0.75(Y-T)I=1,000-50rb. Calculate the equilibrium interest rate. c. Now suppose the G rises by 1,000. Compute private saving, public saving, andnational saving.d. Calculate the new equilibrium interest rate.For these 3 questions please only show the graphical response.arrow_forwardThe gross domestic product (GDP) of Country A is $2 trillion in year 1. What value of investment will increase its GDP to $4.5trillion in year 2? (present your result in the nearest billion dollars, i.e., no decimal places) Assume that the average disposable income and consumption (in real $) of this country's citizen are provided in the table below. Year Income Consumption 1 60,000 50,000 64,726 51,259arrow_forwardWhich of the following can cause planned investment by firms to increase? a. To reduce constant budget deficits, the government announces plans to increase the corporate tax rate. b. An increase in the interest rate due to an increase in the cost of making financial transactions. c. Firms become optimistic about economic conditions after seeing reports of strong growth in consumer spending. d. A major recession has reduced consumption spending, hurting profit levels for high-end car manufacturers.arrow_forward
- 10. T/F/U. Fear of a recession causes a decrease in investment spending—I— which in turn impacts v. Draw a graph consistent with your answer.arrow_forward1.11 If desired investment exceeds actual investment, then…a) The economy is in a recession.b) Inventories are less than the desired level.c) Inventories are accumulating beyond the desired levels.d) Cyclical unemployment exists. 1.12 Read the following extract and answer the question that follows. Women’s empowerment movement eyes 40% of government spending accreditation…Last year the South African government affirmed its support for women-owned businesses as part of its commitment to ensuring that gender equality in Africa’s most advanced economy was achieved. President Cyril Ramaphosa said then: “We are going to drive women’s economic inclusion through public procurement. We have set the target of ensuring that 40% of goods and services procured by public entities are procured from women-owned business.” Source: https://www.news24.com/citypress/news/womens-empowerment-movement-eyes-40-of-government-spending-20210819The above decision by the South African government is an example…arrow_forward1.11 If desired investment exceeds actual investment, then…a) The economy is in a recession.b) Inventories are less than the desired level.c) Inventories are accumulating beyond the desired levels.d) Cyclical unemployment exists. 1.12 Read the following extract and answer the question that follows. Women’s empowerment movement eyes 40% of government spending accreditation…Last year the South African government affirmed its support for women-owned businesses as part of its commitment to ensuring that gender equality in Africa’s most advanced economy was achieved. President Cyril Ramaphosa said then: “We are going to drive women’s economic inclusion through public procurement. We have set the target of ensuring that 40% of goods and services procured by public entities are procured from women-owned business.” The above decision by the South African government is an example of…a) Market participation.b) Government spending.c) Commercialisation.d) Nationalisation. 1.13 Read the following…arrow_forward
- . a. Fred’s Hardware and Hobby House expects its sales to increase at a constant rate of 8 percent per year over the next three years. Current sales are $100,000. Forecast sales for each of the next three years.arrow_forwardConsider the following time series representing % deviations from trend for Investment (black) and GDP (blue): 15 10 GDP -10 Investment -15 1940 1950 1960 1970 1980 1990 2000 2010 2020 Year Investment is... O Countercyclical and more volatile than GDP O Procyclical and more volatile than GDP O Procyclical and less volatile than GDP O Countercyclical and less volatile than GDP Percentage Deviation From Trend 5.arrow_forwardUsing quarterly data from 1947 to the present, graph residential fixed investment relative to GDP a. Compare the graph of residential investment relative to GDP to a graph of the civilian unemployment rate. What happens to residential investment during recessions? In this respect, is residential investment similar to or different from other types of investment? b. During the two decades after World War II, there was an upsurge in population growth and household formation known as the “baby boom.” The baby boom was followed by a “baby bust” during which population growth slowed. How are these demographic trends connected to the behavior of residential investment relative to GDP shown in your graph?arrow_forward
- What is the relative importance of consumption spending (C) in aggreagte demand and some factors that affect it? What is the relative importance of investment spending (I) in aggreagte demand and some factors that affect it? What is the relative importance of government spending (G) in aggreagte demand and some factors that affect it? What is the relative importance of Net Export (NX) (Net Export = spending on exports (X) - imports (M)) in aggreagte demand and some factors that affect it?arrow_forwardAssume that a nation's marginal propensity to consume (MPC) is 0.75. A highiy productive, cost-cutting technology is developed for the production of commercial airplanes. The total industry expenditure in this nation is $100 million for the immediate acquisition and adoption of this technology. (a) For this nation, identify and explain how much this spending on new technology will change each of the following in the first round: i. Income (GDP) L. Saving i. Consumption (b) Assuming a closed economy and no leakages, identify and explain how much this spending on new technology will change each of the following at the end of the final round: i. Income (GDP) ii. Saving li. Consumptionarrow_forward1.11 If desired investment exceeds actual investment, then... a) The economy is in a recession. b) Inventories are less than the desired level. c) Inventories are accumulating beyond the desired levels. d) Cyclical unemployment exists. 1.12 Read the following extract and answer the question that follows. Women's empowerment movement eyes 40% of government spending accreditation ..Last year the South African government affirmed its support for women-owned businesses as part of its commitment to ensuring that gender equality in Africa's most advanced economy was achieved. President Cyril Ramaphosa said then: “We are going to drive women's economic inclusion through public procurement. We have set the target of ensuring that 40% of goods and services procured by public entities are procured from women-owned business." Source: https://www.news24.com/citypress/news/womens-empowerment-movement-eyes-40-of-government- spending-20210819 Accessed: 23/08/21 The above decision by the South African…arrow_forward
arrow_back_ios
arrow_forward_ios
Recommended textbooks for you
- Essentials of Economics (MindTap Course List)EconomicsISBN:9781337091992Author:N. Gregory MankiwPublisher:Cengage LearningBrief Principles of Macroeconomics (MindTap Cours...EconomicsISBN:9781337091985Author:N. Gregory MankiwPublisher:Cengage Learning
- Macroeconomics: Private and Public Choice (MindTa...EconomicsISBN:9781305506756Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage LearningEconomics: Private and Public Choice (MindTap Cou...EconomicsISBN:9781305506725Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage Learning
Essentials of Economics (MindTap Course List)
Economics
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Brief Principles of Macroeconomics (MindTap Cours...
Economics
ISBN:9781337091985
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Macroeconomics: Private and Public Choice (MindTa...
Economics
ISBN:9781305506756
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:Cengage Learning
Economics: Private and Public Choice (MindTap Cou...
Economics
ISBN:9781305506725
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:Cengage Learning