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Author Question: If an economy experiences a 0.8 trillion increase in investment resulting in an increase in real GDP ... (Read 107 times)

Jramos095

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on: Jun 29, 2018
If an economy experiences a 0.8 trillion increase in investment resulting in an increase in real GDP from 10 trillion to 12 trillion,
 
  a. what is the change in equilibrium expenditure?
  b. what is the change in autonomous expenditure?
  c. what is the multiplier?
  d. how would an increase in the marginal tax rate effect the multiplier?

Question 2

If the real interest rate is less than the equilibrium real interest rate, there is a ________ of loanable funds, and ________.
 
  A) shortage; savers increase their saving supply to restore the equilibrium
  B) shortage; borrowers have an easy time finding the funds they want
  C) surplus; some borrowers cannot find the funds they want
  D) shortage; some borrowers cannot find the funds they want
  E) surplus; borrowers have an easy time finding the funds they want


vickybb89

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Reply #1 on: Jun 29, 2018
Answer to Question 1

a. The change in equilibrium expenditure is 2.0 trillion.
b. The change in autonomous expenditure is 0.8 trillion.
c. The multiplier is 2.5.
d. An increase in the marginal tax rate decreases the size of the multiplier.

Answer to Question 2

D


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