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Unformatted text preview: Economics 102 Spring 2004 Practice Questions 6 The Short-Run Macro Model 1. Given that C=500+0.8*Y D fill in the table below. Y D is disposable income and net exports are equal to 0. Income or GDP Taxes Disposable Income Consumption Investment Gov't Purchases Aggregate Expenditure 2,000 1000 600 300 2,500 1000 600 300 3,000 1000 600 300 3,500 1000 600 300 4,000 1000 600 300 4,500 1000 600 300 a. What is the equilibrium level of GDP in this economy? b. Are inventories increasing or decreasing when GDP is 4,000? 2,000? By how much are they changing? 2. Consider the short-run macro model where Y D is disposable income and NX is net exports C=1300 + 0.75 Y D G=400 T=400 I=600 NX=0 a. What is the MPC (marginal propensity to consume) in this model? What does this tell us? b. What is autonomous consumption spending with respect to disposable income in this model? What does this tell us? c. Graph the consumption income line with consumption on the y-axis and income on the x-axis. 2000 4000 6000...
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