PLEASE NOTE: TO RECEIVE CREDIT, PLEASE EXPLAIN IN FULL 1. (What are the three choices that all economies must make? 6 points) Given the information below, answer the questions that follow. C = $40 + 0.8Y, S = $30, X - M = $10.
a. State the name of the economic agent/participant that each equation represents. (4 pts)
b. What is the equilibrium GDP? Explain why $500 is not the equilibrium. (5 pts)
c. What is the marginal propensity to consume (MPC) in this question? (Explain 4 pts)
d. What is the multiplier in this question and explain the significance of the multiplier? (Show all work) (6 pts)
e. How much are consumers saving at the equilibrium and how much non-consumer spending is there at the equilibrium? (4 pts)
f. Assuming that the full-employment level of output is $650, what kind of gap exists and how large is it? Explain (4 pts)
g. Draw a diagram to illustrate the equilibrium found in part (b) and the full employment level of output of $650. (5 pts)
h. What type of policy would you recommend to the government to achieve full-employment level of output? Why? Explain. (4 pts)
i. If government purchases increased by $10 and the price level did not change, what would the new equilibrium be? Show all work (4 pts)
j. How would your answer to part i change if the price level did change? (4 pts)
This course is designed to provide an understanding of market economies and the fluctuations they are subject to. With this in mind, please answer the questions that follow.
a. With reference to an aggregate demand/aggregate supply diagram, discuss factors that may cause inflation and unemployment. (6 pts)
b. Discuss the fiscal policy options that the government can use to deal with a recession and explain how they work. (5 pts)
Assuming the price index in 2017 was 127 and 136 in 2018, what was the inflation rate between 2017 and 2018? (4 pts)
Assuming that the inflation rate from 2014 through 2016 is 6% per year, what would be the real value of a $25,000 income in each of the three years? Show all work. What does the real income for 2015 mean? (6 pts)
Who is the current chairman of the Federal Reserve Board of Governors and how did he or she get the job? Explain. (5 pts)