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Problem Solutions 8

The document presents a series of questions and answers related to aggregate expenditure and equilibrium output levels in an economy, specifically referencing Table 24.1 and Equation 1 for Bananaland. Key findings include the level of aggregate expenditure at various output levels, unplanned inventory changes, and the impact of government spending on equilibrium output. The answers indicate specific values for each question, highlighting the relationships between output, expenditure, and income.

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5 views2 pages

Problem Solutions 8

The document presents a series of questions and answers related to aggregate expenditure and equilibrium output levels in an economy, specifically referencing Table 24.1 and Equation 1 for Bananaland. Key findings include the level of aggregate expenditure at various output levels, unplanned inventory changes, and the impact of government spending on equilibrium output. The answers indicate specific values for each question, highlighting the relationships between output, expenditure, and income.

Uploaded by

kattenlilla15
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

Refer to the information provided in Table 24.1 below to answer the question(s) that follow.

Table 24.1

1) Refer to Table 24.1. At an output level of $1,200 billion, the level of aggregate expenditure
is
A) $1,000 billion.
B) $1,200 billion.
C) $1,300 billion.
D) $1,400 billion.
Answer: C

2) Refer to Table 24.1. At an output level of $1,200 billion, there is an unplanned inventory
change of
A) positive $10 billion.
B) zero.
C) negative $100 billion.
D) positive $100 billion.
Answer: C

3) Refer to Table 24.1. At an output level of $2,000 billion, the level of aggregate expenditure
is
A) $1,500 billion.
B) $1,800 billion.
C) $1,900 billion.
D) $2,000 billion.
Answer: C

4) Refer to Table 24.1. At an output level of $2,000 billion, there is an unplanned inventory
change of
A) positive $100 billion.
B) positive $10 billion.
C) negative $100 billion.
D) zero.
Answer: A

5) Refer to Table 24.1. The equilibrium level of output is ________ billion.


A) $800
B) $1,200
C) $1,600
D) $2,000
Answer: C
6) Refer to Table 24.1. At an output level of $800 billion, disposable income equals ________
billion.
A) $800
B) $700
C) $600
D) $500
Answer: B

7) Refer to Table 24.1. At an output level of $2,000 billion, the value of saving
A) cannot be determined from the given information.
B) is $300 billion.
C) is $200 billion.
D) is $100 billion.
Answer: B

8) If the MPC is 0.7, the tax multiplier is


A) -1.22.
B) -2.22.
C) -2.33.
D) -3.33.
Answer: C

The economy of Bananaland can be characterized by Equation 1

EQUATION 1

C = 2,000 + 0.75Yd
T = 200
G = 400
I = 500

9) Refer to Equation 1. The equilibrium level of income in Bananaland is


A) 4,800.
B) 5,600.
C) 10,000.
D) 11,000.
Answer: D

10) Refer to Equation 1. If government spending in Bananaland increases by $50, equilibrium


output increases by
A) $100.
B) $200.
C) $400.
D) $800.
Answer: B

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