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In the summer of 2013, many news commentators started to raise concern over a potential tapering by the Federal Reserve. If The Federal Reserve were to cut the money supply and raise interest rates to control inflationary pressures, how would that be illustrated in the Keynesian cross diagram? Graphically illustrate and explain the impact on aggregate expenditure and income.
99) Autonomous aggregate expenditures increases by $100 million, the marginal propensity to consume is 0.60, marginal propensity to invest is 0.20, and the marginal propensity to import is 0.10. Calculate the change in income.
100) Autonomous aggregate expenditures decreases by $200 million, the marginal propensity to consume is 0.50, marginal propensity to invest is 0.25, and the marginal propensity to import is 0.10. Calculate the change in income.
101) You are given the following information on the macroeconomy:
Consumption:200 + 0.75Y
Investment:100 + 0.10Y
Government Spending500
Exports100
Imports50 + 0.25Y
Compute the equilibrium level of income, the size of the multiplier, and the change in equilibrium income for an increase in autonomous consumption of $50 million.
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