{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

MacroeconomicsChapter 3 - ANSWERS TO END-OF-CHAPTER...

Info icon This preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
ANSWERS TO END-OF-CHAPTER PROBLEMS CHAPTER 3 Quick Check 1. a. True. b. False. Government spending without transfers was 19% of GDP. c. False. The propensity to consume must be less than one for our model to be well defined. d. True. e. False. f. False. The increase in output is one times the multiplier. g. False. 2. a. Y=160+0.6*(Y-100)+150+150 Y=1000 b. Y D =Y-T=1000-100=900 c. C=160+0.6*(900)=700 3. a. Equilibrium output is 1000. Total demand=C+I+G=700+150+150=1000. Total demand equals production. This is the equilibrium condition used to solve for output. b. Output falls by: 40*multiplier = 40/.4=100. So equilibrium output is now 900. Total demand=C+I+G=160+0.6*(800)+150+110=900. Again, total demand equals production. c. Private saving=Y-C-T=900-160-0.6*(800)-100=160. Public saving =T-G=-10. National saving (or in short, saving) equals private plus public saving, or 150. National saving equals investment. This statement is mathematically equivalent to the equilibrium condition that total demand equals production. Thus, national saving equals investment is an alternative statement of the equilibrium condition.
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern