• QUESTIONS 1-16:

For a given nation, suppose the following table shows the relationship between real consumption and real disposable income (real GDP):

1.     Assume autonomous real investment is $30, autonomous real government spending is $30, and autonomous real net exports is -$20. Compute Aggregate Expenditures at each level of real GDP.  What is the value of equilibrium real GDP?

2.     What is the value of the marginal propensity to consume?

3.     What is the value of the marginal propensity to save?

4.     Compute the value of the Keynesian spending multiplier on goods and services.

5.     Give the amount of the change in the equilibrium level of Real GDP due to a $6 increase in spending on goods and services by households.

6.     Give the amount of the change in the equilibrium level of Real GDP due to a $6 increase in spending on goods and services by the federal government.

7.     Give the amount of the change in the equilibrium level of Real GDP due to a $3 decrease in spending on goods and services by state governments.

8.     Suppose the equilibrium level of Real GDP decreases by $20. What was the amount of the change in autonomous expenditures which caused this to happen?

9.     Compute the value of the Keynesian tax multiplier.

10.  Give the amount of the change in the equilibrium level of Real GDP due to a $6 increase in lump-sum taxes.

11.  Give the amount of the change in the equilibrium level of Real GDP due to a $3 decrease in lump-sum taxes.

12.  Suppose spending on goods and services is increased by $6 and lump-sum taxes are increased by $6. Give the amount of the change in the equilibrium level of Real GDP.

13.  Suppose spending on goods and services is decreased by $3 and lump-sum taxes are decreased by $3. Give the amount of the change in the equilibrium level of Real GDP.

14.  Compute the value of the Keynesian spending multiplier for transfer payments.

15.  Give the amount of the change in the equilibrium level of Real GDP due to a $6 increase in unemployment compensation.

16.  Give the amount of the change in the equilibrium level of Real GDP due to a $3 decrease in Social Security payments.

17.  The federal government passed a one-time tax surcharge to increase tax revenues in 1968 to help pay for the Vietnam War. Was this expansionary fiscal policy, contractionary fiscal policy, or neutral?

Questions 24-27:Given the following hypothetical U.S. Federal income tax brackets and marginal tax rates for single persons for 2011:

compute the total tax due AND the average tax rate (ATR) for a single person with taxable income in 2011 (show your calculations!) of

24.  $5,000

25.  $50,000

26.  $500,000

27.  Which tax structure is this, based on your values of ATR?

Questions 28-30:For each of the following tax liability schedules, identify whether it represents a progressive, regressive, or proportional tax structure:

31.   

32.  What is a Phillips Curve? What two rates are being related?

33.  What were the aggregate supply shocks to the American economy during the 1970s and early 1980s? How did these shocks affect interpretation of the Phillips Curve?

34.  What are the characteristics of the long-run Phillips Curve? How is this curve related to the natural rate of unemployment?

35.  Calculate the value of the velocity of money assuming nominal national income is $50,000 and the money supply is $10,000. Explain what this value of velocity which you computed means.

Questions 44-45: Using the Rudebusch version of the Taylor rule from the internet activity, compute the value of the Federal Reserve’s target for the federal funds rate should be if

44.  inflation rate = 4% and unemployment rate = 5%

45.  inflation rate = 1% and unemployment rate = 9%