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EC101

# EC101 - National Income is(a 300(b 400(c 500(d 600(e 700 3...

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Miah Williams Extra Credit MC Chapter 4 1. Assume that Equilibrium Real GDP is \$20,000 while Potential Real GDP is \$15,000. The marginal propensity to consume is 9/10. Assume that government decides to lower taxes by \$1,000. To pay for this, it lowers government purchases by \$1,000. As a result of these two changes, what is the new Equilibrium Real GDP? (a) \$19,000 (b) \$20,000 (c) \$21,000 (d) \$14,000 (e) \$1,000 National Income Taxes Disposable Income Consumption Investment Government \$100 \$100 \$0 \$50 \$25 \$100 \$200 \$100 \$100 \$125 \$25 \$100 \$300 \$100 \$200 \$200 \$25 \$100 \$400 \$100 \$300 \$275 \$25 \$100 \$500 \$100 \$400 \$350 \$25 \$100 \$600 \$100 \$500 \$425 \$25 \$100 \$700 \$100 \$600 \$500 \$25 \$100 \$800 \$100 \$700 \$575 \$25 \$100 2. Using these numbers in the above figure, the equilibrium real GDP (equal to
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Unformatted text preview: National Income) is: (a) 300 (b) 400 (c) 500 (d) 600 (e) 700 3. Assume that the market for the stock of Microsoft begins in equilibrium. Then, both buyers and sellers expect that the new Linux (a competitor of Microsoft Windows) will be a large success, reduing Microsoft sales . When the new equilibrium is reached (a) the price and quantity of the stock will both have risen (b) the price and quantity of the stock will both have fallen (c) the quantity of the stock will fall and the price will rise (d) the quantity of the stock will fall but the effect on price cannot be determined (e) the price of the stock will fall but the effect on quantity cannot be determined...
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