13. Assuming that an economy’s aggregate demand is given by its domestic consumption C and investment I, AD = C + I = c0 + c1Y + I. In the economy’s goods market equilibrium, this equals its outpu

13. Assuming that an economy’s aggregate demand is given by its domestic consumption C and investment I, AD = C + I = c0 + c1Y + I. In the economy’s goods market equilibrium, this equals its output: AD = Y. Solving for Y this yields:

Y = [1/(1  -c1 )] (c0+ I)

Given this equation, which of the following statements is correct?

  1. The multiplier is given by 1 – c1.
  2. The boost in the economy’s output is the same, regardless of whether the aggregate demand shock comes from an increase in investment I or in autonomous consumption c0.
  3. The larger the marginal propensity to consume (c1), the smaller the multiplier.
  4. If c1 = 1/3, then a £1 million increase in investment would result in a £2 million increase in output.

14. In the US and the UK, loans are widely available based on a rise in home equity. Additionally, unlike in France and Germany where large down-payments (as a percentage of the house price) are required, in the US and the UK only small down-payments are required for house purchases. On the basis of this information, which of the following statements is correct for the US and the UK when there is a rise in housing prices?

  1. There is a positive financial accelerator effect for the existing homeowners who are credit-constrained.
  2. There would be no effect on the consumption of the existing homeowners who are not credit-constrained.
  3. Would-be homeowners would increase saving and reduce their consumption more than they would in France and Germany.
  4. A rise in housing prices is likely to dampen consumption in the US and the UK.

15. Which of the following statements regarding fiscal policy is correct?

  1. Expansionary fiscal policy (e.g. increasing the government deficit or reducing the surplus) always has a stabilising effect on the economy.
  2. Unemployment benefits and taxes automatically increase government spending and cut taxation in a downturn, while they trim spending and raise taxes in a boom. These are therefore automatic stabilisers.
  3. In a recession, the aim of a government fiscal expansion is to over-ride the effects of automatic stabilisers.

As a family worried about mounting debts should cut spending and save more, so should an economy adopt austerity measures when its debt level is high, to restore its public finances to balance

Show more

Calculate Your Essay Price
(550 words)

Approximate price: $22

Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
The price is based on these factors:
Academic level
Number of pages
Basic features
  • Free title page and bibliography
  • Unlimited revisions
  • Plagiarism-free guarantee
  • Money-back guarantee
  • 24/7 support
On-demand options
  • Writer’s samples
  • Part-by-part delivery
  • Overnight delivery
  • Copies of used sources
  • Expert Proofreading
Paper format
  • 275 words per page
  • 12 pt Arial/Times New Roman
  • Double line spacing
  • Any citation style (APA, MLA, Chicago/Turabian, Harvard)

Our guarantees

Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.

Money-back guarantee

You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.

Read more

Zero-plagiarism guarantee

Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.

Read more

Free-revision policy

Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.

Read more

Privacy policy

Your email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.

Read more

Fair-cooperation guarantee

By sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.

Read more

Order your essay today and save 10% with the coupon code: best10