MACRO Ans for Ch 11宏观经济学答案.docx

MACRO Ans for Ch 11宏观经济学答案.docx

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MACROAnsforCh11宏观经济学答案

MACROAnswerstotextquestionsandproblemsforChapter11

AnswerstoReviewQuestions

1.ThekeyassumptionofthebasicKeynesianmodelisthatintheshortrun,firmsmeetdemandatpre-setprices.Thefactthatfirmsproducetomeetdemandimpliesthatchangesindemand（andthereforeaggregatespending）dictatestheoutputlevelintheshortrun.

（LO1

AACSB:

Analytic

Bloom’s:

Remember

2.Therearemanypossibleexamples.Goodsthatarestandardizedandareboughtandsoldinlargequantities,suchaswheatorothercommodities,tendtohaverapidlyadjustingpricessincethebenefitsofsettingupactiveauctionmarketsforsuchgoodsusuallyexceedsthecosts.Goodssuchasdressesorskirts,whicharenotstandardized（theyvaryinsize,color,style）andwhichareusuallysoldinretailstoresonebyone,tendtohavepricesthatarechangedlessfrequently.

（LO1）

AACSB:

Analytic

Bloom’s:

Understand

3.Plannedaggregateexpenditure（PAE）isthetotalplannedspendingonfinalgoodsandservices.Itconsistsofconsumptionspending,investmentspending,andgovernmentpurchasesofgoodsandservices,andnetexports（exportslessimports）.

Achangeinoutputalterstheincomereceivedbyproducers,whichinturnaffectsconsumptionspendingthroughtheconsumptionfunction.SinceconsumptionisthelargestcomponentofPAE,changesinoutputleadtochangesinPAE.

（LO2）

AACSB:

Analytic

Bloom’s:

Analyze

4.Plannedspendingincludesplannedadditionstoinventoriestofirms.Whenfirms’actualsalesdifferfromplannedsales,theresultingchangestoinventorywilldifferfromwhatwasplanned,andactualspendingwilldifferfromplannedspending.Forexample,supposeafirmplannedtoproduce100units,sell90unitstothepublic,andadd10unitstoitsinventory.Butthefirmsellsonly80unitsandthusmustadd20unitstoinventory.Thefirm’splannedinventoryinvestment（acomponentofplannedinvestmentandthustotalplannedspending）was10units,butitsactualinventoryinvestmentwas20units.Sothefirm’sactualinvestmentspending（inclusiveofinventoryinvestment）isgreaterthanitplanned.Ontheotherhand,ifthefirmsoldall100units,itwouldaddnothingtoinventory,anditsactualinvestment（includinginventoryinvestment）wouldbelessthanplanned.

（LO2）

AACSB:

Analytic

Bloom’s:

Analyze

5.Figure18.2showsaconsumptionfunction.Consumption,（C）,isontheverticalaxisanddisposableincome,（Y–T）,isonthehorizontalaxis.

a.Amovementfromlefttorightalongtheconsumptionfunctionshowsthatconsumptionincreasesasdisposableincomeincreases.

b.Aparallelshiftupwardoftheconsumptionfunctionindicatesthatpeopleareconsumingmoreatanygivenlevelofdisposableincome.Thisimpliesthatsomefactorotherthanachangeindisposableincome,autonomousconsumption,isstimulatingconsumptionsuchasthewealtheffectorchangesintheinterestrateand/orexpectationsonfutureincome.

（LO2）

AACSB:

Analytic

Bloom’s:

Analyze

6.Figure18.4showstheKeynesiancrossdiagram.The45-degreelinecapturesthedefinitionofshort-runequilibriumoutput,Y=PAE;thisimpliesthattheshort-runequilibriumoutputmustlieonthisline.Theflatterline,theexpenditureline,showshowplannedaggregateexpendituredependsonoutput.Becauseincreasedoutputraisesdisposableincome,whichinturnincreasesconsumptionandplannedaggregateexpenditure,theexpenditurelineisupwardsloping.Autonomousexpenditureisgivenbytheinterceptoftheexpenditureline,themarginalpropensitytoconsumeequalstheslopeoftheexpenditureline,andshort-runequilibriumoutputisthepointonthehorizontalaxiscorrespondingtotheintersectionoftheexpenditurelineandtheY=PAEline.Tofindinducedexpenditure,drawahorizontallinefromtheintersectionofY=PAEandtheexpenditurelinetotheverticalaxis.Thedifferencebetweentheresultingpointontheverticalaxis（whichequalsactualexpenditure）andtheinterceptoftheexpenditureline（whichequalsautonomousexpenditure）equalsinducedexpenditure.

（LO3）

AACSB:

Analytic

Bloom’s:

Analyze

7.Themainreasonforthe2007-2009recessionwastheburstingofthebubbleintheUnitedStateshousingmarketinthesummerof2006,causingbothhouseholdsandbusinessestoreducetheirspending.Forhouseholdsthismeantbothareductioninthevalueofoneofthemostcommonlyheldassets（wealtheffect）andincreaseduncertaintyaboutthefuture,reducingconsumers’willingnesstospendateachlevelofdisposableincome（afallin

）.Forbusinesses,thedisruptioninfinancialmarketsledtoacreditcrunch,whereitwasalmostimpossibleforfirmstoborrowfundsforinvestmentspending,therebyreducingplannedinvestment.Eachoftheseleadstoareductioninautonomousexpenditure.Graphically,adeclineinautonomousexpenditureshiftstheexpenditurelinedownwardandlowersshort-runequilibriumoutputbelowpotentialoutputsothatarecessionarygapiscreated.（SeeFigure18.5foranillustration.）

（LO3,LO4）

AACSB:

Analytic

Bloom’s:

Apply

8.Themultipliertellsustheeffectofaone-unitincreaseinautonomousexpenditureonshort-runequilibriumoutput.Themultiplierisgreaterthanonebecauseaone-unitincreaseinautonomousexpendituredirectlyincreasesoutputbyoneunitandincreasesproducers’incomesbyoneunit.Theincreaseinincomeleadstofurtherspendingonthepartofproducers,whichraisesincomeofotherproducersandsubsequentlyincreasestheirspending.Thismultiple-roundprocessofspendingandincomecreationleadstoafinalincreaseinoutputthatisgreaterthantheone-unitinitialimpact.

（LO4）

AACSB:

Analytic

Bloom’s:

Analyze

9.Theincreaseingovernmentpurchasesraisesautonomousexpenditureby50units.Thetaxcutraisesdisposableincomeby50units,whichstimulatesplannedaggregateexpenditurebyincreasingconsumptionspending.However,thetaxcutraisesautonomousexpenditurebyonly50unitstimesthemarginalpropensitytoconsume（MPC）,asnotalladditionalincomeisspent.AslongastheMPCislessthanone,thetaxcutwillincreaseautonomousexpenditurebylessthan50units.Thustheincreaseingovernmentpurchaseswillhavethegreaterimpactonplannedaggregateexpenditure.

（LO4）

AACSB:

Analytic

Bloom’s:

Apply

10.First,governmentspendingandtaxingdecisionsmayaffectpotentialoutputaswellasplannedaggregateexpenditure.Whatthegovernmentspendsitsmoneyon,aswellastheincentiveeffectsofchangesintaxandtransferprograms,needtobefactoredinwhenevaluatingtheeffectsoffiscalpolicy.Long-rungrowthofpotentialoutputisaffectedbythetypeofspendingthegovernmentpursues,aswellashowtaxpoliciesaffectlaborsupplydecisionsandinvestmentdecisions.

Second,changesingovernmentspendingandtaxingcanaffectthegovernment’sbudgetdeficit,whichinturnmayaffectlong-runinvestmentincapitalgoodsandthegrowthofpotentialoutput.Forexample,anexpansionaryfiscalpolicymayboostplannedaggregateexpenditureintheshortrun,leadingtoincreasedoutputandemployment,butitmayalsoraiserealinterestratesifitreducesnationalsaving（byincreasingthegovernment’sbudgetdeficitwithoutanoffsettingincreaseinprivatesaving）.Theincreasedinterestratesmayreducecapitalinvestmentandlong-rungrowthofoutput–thisissometimescalledthecrowdingouteffect.

Third,fiscalpolicyisrelativelyinflexible,withlonglegislativeprocessesreducingthegovernment’sabilitytoquicklyrespondtooutputgaps.Thedelaysinimplementationmaystemfromthelegislativeprocessitself（budgetrecommendationsarefirstpresentedtoCongressbythePresident,thenareoftendebatedformonthsbeforefinallybecominglaw,andmaytakeeffectmonthsafterthis）orfrompoliticalwranglingoverspendingandtaxingpriorities.

（LO5）

AACSB:

Analytic

Bloom’s:

Apply

AnswerstoProblems

1.Acme’splannedinvestmentineverycaseis$1,500,000（itsplannedexpenditureonnewequipmentpluszeroplannedincreaseininventories）.ThekeytothisproblemistofindtheamountofunplannedinventoryinvestmentAcmemakesthenaddthistoitsplannedinvestmenttofindAcme’sactualinvestment.

a.IfAcmesells$3,850,000worthofgoods,ithasunplannedinventoryinvestmentof$150,000andtotalactualinvestmentof$1,650,000.

b.IfAcmesells$4,000,000worthofgoodsasitplanned,itsactualinvestmentof$1,500,000equalsitsplannedinvestment.

c.IfAcmesells$4,200,000worthofgoodsitmustdrawdown$200,000worthofgoodsfromitsexistinginventory,implyingthatinventoryinvestmentisnegative$200,000.Acme’sactualinvestmentinthiscaseis$1,500,000-$200,000=$1,300,000.

Outputequalsshort-runequilibriumoutputincaseb,whereplannedspendingandactualspendingareequal,asnoproducerhasanincentivetoproduceeithermoreorless.

（LO1）

AACSB:

Analytic

Bloom’s:

Apply

2.Workingwiththeconsumptionfunction:

a.Disposableincome（before-taxincomelesstaxespaid）andconsumptionareasfollows:

Before-taxincome（$）

Taxespaid（$）

Disposableincome（$）

Consumption（$）

25,000

3,000

22,000

20,000

27,000

3,500

23,500

21,350

28,000

3,700

24,300

22,070

30,000

4,000

26,000

23,600

Graph:

Themarginalpropensitytoconsumeistheincreaseinconsumptioncausedbyaonedollarincreaseindisposableincome.Inthiscase,whendisposableincomeincreasesbyfrom22,000to23,500,ariseof1500,consumptionrisesby1350.TheMPCistherefore1350/1500=0.9.Wecanconfirmthisbycheckingtheotherpointsontheconsumptionfunction.Forexample,whendisposableincomerisesbyanother800（24,300–23,500）,consumptionrisesby720（