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Refer to the table on the next page in answering the questions that follow If full employment in this economy is 130 million will there be an

Refer to the table on the next page in answering the questions that follow:

a. If full employment in this economy is 130 million, will there be an inflationary expenditure gap or a recessionary expenditure gap? What will be the consequence of this gap? By how much would aggregate expenditures in column 3 have to change at each level of GDP to eliminate the inflationary expenditure gap or the recessionary expenditure gap? Explain. What is the multiplier in this example?

b. Will there be an inflationary expenditure gap or a recessionary expenditure gap if the full-employment level of output is $500 billion? Explain the consequences. By how much would aggregate expenditures in column 3 have to change at each level of GDP to eliminate the gap? What is the multiplier in this example?

c. Assuming that investment, net exports, and government expenditures do not change with changes in real GDP, what are the sizes of the MPC, the MPS, and the multiplier?

(1) Possible Levels of

Employment, Millions

(2) Real Domestic Output, Billions

 

(3)Aggregate Expenditures (Ca + IXn + G), Billions

90

$500

$520

100

550

560

110

600

600

120

650

640

130

700

680

Apr 30 2020 View more View Less

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