Ask Question, Ask an Expert


Ask Business Economics Expert

Equilibrium income using multiplier model and graphical representation of short-run Aggregate Demand and Supply Model

Consider the following hypothetical economy.

This economy can be represented algebraically as:

Consumption: C = 100 + 0.75YD

Investment I = 200

Government Spending = 150

Net Taxes NT = 0.2Y

Exports X = 80

Imports M = 0.1Y

Disposable Income YD = Y-NT = Y - tY

Aggregate Expenditure AE = C+I+G+NX

Assume the general price level is constant.

a) Using the multiplier model, compute the value of equilibrium income (Y).

b) Now assume full-employment equilibrium output is 1000. Illustrate what type of output gap exists and elucidate how much is the output gap? Use an aggregate demand (AD) and short run aggregate supply (AS) model to show the output gap graphically?

Business Economics, Economics

  • Category:- Business Economics
  • Reference No.:- M921379

Have any Question? 

Related Questions in Business Economics

You currently have 575000 in your retirement savings

You currently have $575,000 in your retirement savings account. You would like to have $2,000,000 when you retire 15 years from today. How much must you deposite (in equal amounts) at the end of each of the next fifteen ...

The university of cincinnati center for business analytics

The University of Cincinnati Center for Business Analytics is an outreach center that collaborates with industry partners on applied research and continuing education in business analytics. One of the programs offered by ...

A explain how marginal control costs are equalised across

a) Explain how marginal control costs are equalised across firms under a transferable pollution permit system (also known as an emissions trading scheme) using a diagram to illustrate your answer. b) What advantage does ...

Ambassador automobiles aa is not sure of their order of 100

Ambassador Automobiles (AA) is not sure of their order of 100 units to Diversitek (D). Based on the market research, there is only a 35% chance that AA purchases the order of 100 units of SS from D and a 65% chance that ...

1 flyer corporation manufactures two products product a and

1. Flyer Corporation manufactures two products, Product A and Product B. Product B is the more complex of the two products, requiring three hours of direct labor time per unit to manufacture compared to one and one-half ...

Consider the production functiony akalphal betawhere y

Consider the production function Y = AKαL β where Y represents output, K and L represent the inputs of capital and labor, and A is total factor productivity. The coefficients α and β are positive. a. Show that this produ ...

Football coach ira blooper has just been fired as head

Football coach Ira Blooper has just been fired as head coach at a large university. His buyout amount is $7.5 million, and Blooper will be repaid (as per his contract) in monthly instalments over the next 4 years. If the ...

Suppose that victoria and her friends are running a

Suppose that Victoria and her friends are running a fundraiser by selling donuts. They want to know what will happen to their revenue if they increase the price of each donut from $0.80 to $1. What concept do they need t ...

Assignmentrespond to discussion questions with 150-200

Assignment Respond to Discussion Questions with 150-200 words. In your efforts to provide the answers, I would like to encourage you to also use personal experiences in your responses. Also, cite information from your te ...

A bank account pays 12 nominal interest with quarterly

A bank account pays 12% nominal interest with quarterly compounding. A series of deposits started with a deposit of $5,000 on January 1, 2012. Deposits in the series will occur each six months. The last deposit in the se ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

A cola-dispensing machine is set to dispense 9 ounces of

A cola-dispensing machine is set to dispense 9 ounces of cola per cup, with a standard deviation of 1.0 ounce. The manuf

What is marketingbullwhat is marketing think back to your

What is Marketing? • "What is marketing"? Think back to your impressions before you started this class versus how you

Question -your client david smith runs a small it

QUESTION - Your client, David Smith runs a small IT consulting business specialising in computer software and techno

Inspection of a random sample of 22 aircraft showed that 15

Inspection of a random sample of 22 aircraft showed that 15 needed repairs to fix a wiring problem that might compromise

Effective hrmquestionhow can an effective hrm system help

Effective HRM Question How can an effective HRM system help facilitate the achievement of an organization's strate