How the multiplier leads to closing the gap

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Reference no: EM131346794

Discussion 1

The relationship between expenditures and income is the basis for the Keyensian model. On page 323, do problem 1 and on your own draw the graph. Then answer a and c.

Problem 1.

Real GDP C

IP

G

MX
3,000 2,500

300

500

200
4,000 3,250

300

500

200
5,000 4,000

300

500

200
6,000 4,750

300

500

200
7,000 5,500

300

500

200
8,000 6,250

300

500

200

a. What is the marginal propensity to consume implicit in these data?

b. Plot a 45° line, and then use the data to draw an aggregate expenditure line.

c. What is the equilibrium level of real GDP? Illustrate it on your diagram.

d. Suppose that investment spending increased by 250 at each level of income. What would happen to equilibrium GDP?

Discussion 2

Discuss how the Multiplier leads to closing the gap between equilibrium and full employment.

Challenge question: Discuss why the tax multiplier is different. When would this multiplier be used?

Reference no: EM131346794

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len1346794

1/9/2017 1:07:18 AM

Ive attached the files. Please show work step by step so that anyone can see how the answers were concluded. Thanks again- The relationship between expenditures and income is the basis for the Keyensian model.  On page 323, do problem 1 and on your own draw the graph. Then answer a and c.

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