Why initial change in planned aggregate expenditure results

Assignment Help Microeconomics

Reference no: EM13183809

Why does an initial $400 billion annual decrease in consumption spending make income fall by more than $400 billion per year. Explain why an initial change in planned aggregate expenditure results in a much larger change in equlibrium income.

Reference no: EM13183809

Questions Cloud

What is the value of the multiplier : Keynesian Economics: Suppose the following about the economy of the United States: Government spending = 660, planned investment (Ip) = 215, autonomous consumption is 200, net exports is 100 and taxes are 100. In addition, for each additional $1..

Explain the characteristics of natural monopolies : Suppose that a natural monopolist was required by law to charge average total cost. On a diagram, label the price charged and the deadweight loss to society relative to marginal cost pricing. Briefly explain your diagram and comment on the results..

Explain the marginal cost and average total cost curves : In the early 1990's, a study found that moderate daily consumption of red wine reduced the incidence of heart disease in labratory rats. As a result of national press coverage of the report, the demand for red wine increased dramatically. Assume t..

Why government will fix macroeconomic failure : Fiscal policies can work only if private enterprises respond to them in certain way; if they respond in other ways, the policies fail. Explain and give examples.Can the government make things worse by intervening in markets Are there other options..

Why initial change in planned aggregate expenditure results : Why does an initial $400 billion annual decrease in consumption spending make income fall by more than $400 billion per year. Explain why an initial change in planned aggregate expenditure results in a much larger change in equlibrium income.

How to reject fiscal stimulus measures in all policy forms : Some reject fiscal stimulus measures in all policy forms. Explain what the various limitations are to a successful fiscal stimulus. Be sure to consider the damaging activities and decisions of (a) private corporations, (b) comm..

How much will equilibrium income change : Whether the government cuts taxes by $200 billion or increases transfer payments by $200 billion, the initial effect on disposable income is the same. By how much does disposable income initially change? If the government cuts taxes, by how much wi..

What is the incremental irr : A company is considering replacing its fleet of delivery vans and has a choice between gasoline and diesel powered vehicles. The gasoline powered truck has an initial cost of $34000 and a fuel economy of 9 MPG. The diesel powered model has an init..

Estimate the total material cost and the total manufacturing : Then the materials cost for each structure was $25,000 and the cost capacity factor is 0.65. Cost index values for 1999 and 2011 are 200 and 289 respectively. The estimated manufacturing cost for the first 1,000 square foot structure is $12,000. U..

User Account

All Pages