2. Compute the price index for each year. Use the first year as the base year. W
ID: 1159229 • Letter: 2
Question
2. Compute the price index for each year. Use the first year as the base year. What was the inflation rate between the two years. Item Coffee Tuition Quantity 20 pounds 1 year 100 pizzas 75 days 2 weeks Unit Price-Last Year Unit Price-This Year $3.00 4,000.00 8.00 15.00 300.00 $4.00 7,000.00 10.00 10.00 500.00 VCR rental Vacation 3. Suppose you have $500 in savings when the price level index is at 100. a. If inflation pushes the price level up by 20 percent, what will be the real value of your b. What would happen to the real value of your savings if the price level instead declined by 10 percent Chapter 11 1. Assume that the diagram that follows depicts aggregate supply and demand economy. Full employment occurs when S6 trillion of real output is produced a. What is the equilibrium rate of output? b. How far short of full employment is the equilibrium rate of output? IIlustrate a shift of aggregate demand that would change the equilibrium rate of output to trillion. Label the new curve AD,. e. d. What is the price level at the new equilibrium? e. Illustrate a shift of aggregate supply (AS2) that would, when combined with ADi, move f. equilibrium output to $6 trillion. What is the price level at this new equilibrium?Explanation / Answer
17) Since C=400+0.8Y
Which means MPC=0.8
And we know government expenditure multiplier=1/1-MPC=1/1-0.8=1/0.2=5
Thus increase in Government expenditure by $50billion will increase the Equilibrium level of income by $250
2) Transfer multiplier=Mpc/1-Mpc=0.8/1-0.8=0.8/0.2=4
Thus equilibrium level of income imcreases by $200billion.
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