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Chapter 13 HW Questions

The document contains homework questions about Keynesian economics including: events that may cause recession or inflation; calculating savings, MPC, and MPS from data; filling in a table about Keynesian cross functions; and using a Keynesian cross diagram to find equilibrium output given tax rates, spending, exports, and imports.

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69 views3 pages

Chapter 13 HW Questions

The document contains homework questions about Keynesian economics including: events that may cause recession or inflation; calculating savings, MPC, and MPS from data; filling in a table about Keynesian cross functions; and using a Keynesian cross diagram to find equilibrium output given tax rates, spending, exports, and imports.

Uploaded by

Raph 1123
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Chapter 13 HW questions

5. In a Keynesian framework, which of the following events might cause a


recession? Which might cause inflation? Sketch AS-AD diagrams to
illustrate your answers.
a. large increase in the price of the homes that people own
Increase in price and inflation.
b. rapid growth in the economy of a major trading partner
Decrease in price, would lead to recession.
c. the development of a major new technology offers profitable
opportunities for business
Would lead to inflation
d. the interest rate rises the goods imported from a major trading
partner become much less expensive
Would lead to inflation
e. the goods imported from a major trading partner become much less
expensive
Would lead to a recession.

10. Based on the following data, calculate the amount saved, the MPC, and the MPS.

The MPC is 0.95 and the MPS is 19.

Income Consumption Savings


5,000 4,000 1000
6,000 4,950 1050
7,000 5,900 1100
8,000 6,850 1150
9,000 7,800 1200

12. . In the Keynesian cross framework, fill in the following table

Slope up, What What moves entire


Down, or flat determines function up or
slope down
Consumption U C Pric
function p o e
n Lev
s el
u
m
p
t
i
o
n
Investment F I Pric
function l n e
a v Lev
t e el
s
t
m
e
n
t
Government U G Exp
spending function p D orts
P
Export D E Imp
function o x orts
w p
n o
r
t
s
Import U I Exp
function p m orts
p
o
r
t
s
14. The chart below represents the data behind a Keynesian cross diagram. Assume
that the tax rate is 0.4 of national income; the MPC out of after-tax income is 0.8;
investment is 2,000; government spending is 1,000; exports are 2,000; and
imports are 0.05 of after-tax income. What is the equilibrium level of output for
this economy?

National After-tax Minus Aggregate


Income income Consumption I+G+X Imports Expenditures
8,000 4,800 4,340 5,000 240 9,100
9,000 5,400 4,820 5,000 270 9,550
10,000 6,000 5,300 5,000 300 10,000
11,000 6,600 5,780 5,000 330 10,450
12,000 7,200 6,260 5,000 360 10,900
13,000 7,800 6,740 5,000 390 11,350

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