incentives______ 10) What is the key idea in the aggregate expenditure macroeconomic model?______that in any particular year‚ the level of GDP is determined mainly by the level of aggregate
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EC 1101 Study Questions Fall 2012 Chapter 5 Market failures‚ public goods and externalities 1. Explain the functions of government in an economy. Why do governments intervene in markets? 2. (a) Using the concept of allocative efficiency‚ explain the meaning of “market failure” and “externality”. Why is this is a type of market failure? (b) Explain the difference between the market equilibrium output and the efficient level of output when there are (i) negative externalities and (ii) positive
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1 a. Aggregate expenditure: Aggregate expenditure is the sum of consumption expenditure‚ investment‚ government expenditure‚ and net exports i.e. AE = C + I + G + (X – M) In the figure‚ B is consumption expenditure‚ D is investment‚ C is government expenditure‚ and E is net exports. Therefore Aggregate Expenditure = $7‚064 billion + $1‚624 billion + $1‚840 billion + (−$330 billion) which is $10‚198 billion. b. Aggregate income: Aggregate income equals aggregate expenditure‚ which from
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Economics TUT006 Problem Set 8 Written Report 8.1 Suppose that the economy of FarFarAway is described by the following equations: i. Planned consumption: C = 1000+0.8(Y-T) ii. Planned investment: I = 2000-1000r iii. Planned government expenditure: G = 2000 iv. Planned net export: NX = 90 v. Income taxes: T = tY vi. Income tax rate: t=0.20 vii. Real interest rate: r = 0.05 viii. Potential output: Yf = 15000 a. What is the short-run equilibrium output
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Chapter 18 p534 1.What is the key assumption of the basic Keynesian model? Explain why this assumption is needed if one is to accept the view that aggregate spending is a driving force behind short-term economic fluctuations. The Keynesian model shows how fluctuations in planned aggregate expenditure can cause actual output to differ from potential output. This method is necessary because if it were not used companies would have to change prices every time there was a possible change in demand
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1 Managerial Economics 2010 Answers to All Tutorial Questions Topic 1 : What is managerial economics Questions from Chapter 1 of the Text (McTaggart‚ Findlay & Parkin) Review Question 1 (pp. 4) List some examples of scarcity in Australia today. An example of scarcity at the economy-wide level would be people with lower incomes being forced to choose between food and petrol due to high prices for both. An example of scarcity at an individual level would be a person unable to afford both
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service. 2. Why does GDP equal aggregate income and also equal aggregate expenditure? Aggregate expenditure equals consumption expenditure plus investment plus government expenditure plus net exports. Whereas‚ Aggregate income is equal to the total amount paid for the services of the factors of production used to produce final goods and services. When firms pay out‚ incomes they receive from the sale of the output‚ aggregate income equals aggregate expenditure because the two methods of measuring
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Keynesian Economics Keynes refuted Classical economics’ claim that the Say’s law holds. The strong form of the Say’s law stated that the "costs of output are always covered in the aggregate by the sale-proceeds resulting from demand". Keynes argues that this can only hold true if the individual savings exactly equal the aggregate investment. While Classical economics believes in the theory of the invisible hand‚ where any imperfections in the economy get corrected automatically‚ Keynesian economics
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is at the natural rate of unemployment. 3) The long-run aggregate supply curve illustrates the A) relationship of prices with the level of GDP when real GDP equals potential GDP. B) relationship of aggregate supply and aggregate demand. C) amount of products producers offer at various prices when money wages and other resource prices do not change. D) surpluses‚ shortages and equilibrium level of GDP. 4) The long-run aggregate supply curve is ________ because along it‚ as prices rise‚
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Exploring Economics 5 Chapter 6 Fiscal policy and the budget Questions P.162 Think it over 1. What is a budget? Do you prepare a budget to plan your expenditure and income each month? 2. Can you cite some sources of government revenue and types of government expenditure in Hong Kong? 3. How do government revenue and government expenditure affect the Hong Kong economy? P.163 Fig 6.2 According to the equity principle‚ who should pay more tax? P.165 Discuss 6.1 By the benefit principle‚ those
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