Access over 20 million homework & study documents

Answer

Content type
User Generated
Subject
Economics
School
Cal Poly Pomona
Type
Homework
Rating
Showing Page:
1/3
1-
a)
According to Okun's law , 12% loss of gdp.
 
   
   
 
Loss of gdp = 3.5% × (2)
Loss of gdp = 7%
b)
Loss of gdp = (7% × 6,000)
Loss of gdp = 420
Spending multiplier = 1/(1 - mpc)
Spending multiplier = 1/(1 - 0.9)
Spending multiplier = 1/ 0.1
Spending multiplie = 10
So,
Eliminate gdp loss = 420/10
Eliminate gdp loss = 42

Sign up to view the full document!

lock_open Sign Up
Showing Page:
2/3
2-
  


Consumption Expenditure increase : $6,000
Income increase = $48,000 - $40,000 = $8,000
MPC = $6000 / $8000 = 0.75
MPS = 1-MPC = 1- 0.75 = 0.25
Multiplier = 1/1-MPC = 1 / (1 - 0.75)= 1 / 0.25 = 4

Sign up to view the full document!

lock_open Sign Up
Showing Page:
3/3

Sign up to view the full document!

lock_open Sign Up
Unformatted Attachment Preview
1a) According to Okun's law , 12% loss of gdp. 𝑁𝑎𝑡𝑢𝑟𝑎𝑙 𝑟𝑎𝑡𝑒 𝑜𝑓 𝑢𝑛𝑒𝑚𝑝𝑙𝑜𝑦𝑚𝑒𝑛𝑡 = 5% 𝐶𝑦𝑐𝑙𝑖𝑐𝑎𝑙 𝑢𝑛𝑒𝑚𝑝𝑙𝑜𝑦𝑚𝑒𝑛𝑡 = 𝐴𝑐𝑡𝑢𝑎𝑙 𝑢𝑛𝑒𝑚𝑝𝑙𝑜𝑦𝑚𝑒𝑛𝑡 − 𝑅𝑎𝑡𝑒 𝑜𝑓 𝑈𝑛𝑒𝑚𝑝𝑙𝑜𝑦𝑚𝑒𝑛𝑡 𝐶𝑦𝑐𝑙𝑖𝑐𝑎𝑙 𝑢𝑛𝑒𝑚𝑝𝑙𝑜𝑦𝑚𝑒𝑛𝑡 = 8.5% − 5% 𝐶𝑦𝑐𝑙𝑖𝑐𝑎𝑙 𝑢𝑛𝑒𝑚𝑝𝑙𝑜𝑦𝑚𝑒𝑛𝑡 = 3.5% Loss of gdp = 3.5% × (2) Loss of gdp = 7% b) Loss of gdp = (7% × 6,000) Loss of gdp = 420 Spending multiplier = 1/(1 - mpc) Spending multiplier = 1/(1 - 0.9) Spending multiplier = 1/ 0.1 Spending multiplie = 10 So, Eliminate gdp loss = 420/10 Eliminate gdp loss = 42 2- 𝑀𝑃𝐶 + 𝑀𝑃𝑆 = 1 𝑀𝑢𝑙? ...
Purchase document to see full attachment
User generated content is uploaded by users for the purposes of learning and should be used following Studypool's honor code & terms of service.

Anonymous
Just the thing I needed, saved me a lot of time.

Studypool
4.7
Trustpilot
4.5
Sitejabber
4.4

Similar Documents