Name:______Alec Budge________________________________

Section: ____________

E-Portfolio Signature Assignment

Salt Lake Community College
Macroeconomics - Econ 2020
Professor: Heather A Schumacker

Please type your answers to the following 5 questions. If you need to hand draw the graphs and then scan them in you may. Make
your answers as detailed as you can show off what you know! When you have completed this assignment post it to your e-portfolio.
Make sure to put your reflection statement on your web site too. A reflection statement is one in which you relate how this assignment
has used information from prior classes or how it may be useful in the future. (4pts)

1.

What is the formula for PAE (write out the full name)? Circle the largest component and fill in the chart. Under each put the
components and something unique. (19pts)

PAE = _________Consumer Expenditure__________

+ ___Investment Expenditure ________________

____Government Expenditure_______________

+ _____Net Exports______________

Components:
Circle the largest category

Components: Investments

Components: Government

Components:

1. Durable Goods

1. Business

Purchases
1. purchases by gov. on final

1. Imports

2. Nondurable Goods
3. Services - largest

2. Construction
3. Inventory
Excludes:

goods and services

2. Construction of roads

2. Exports

1.

Excludes:

Transfer of assets

1. transfer payments
2. interest paid on gov. debt

2.

Given the following information, what is the short-run equilibrium output (show your work) _____2610___________ What is the
autonomous expenditure ______890___________ what is the induced expenditure _______.5y__________ where would it cross
the Y axis______890___________ what is the slope of PAE _______.5__________ what is the multiplier ________2_________
if there is a 10 unit increase in PAE what will happen to the short run equilibrium (increase or
decrease)________increase________ and by how much _______20__________ and will it lead to a recessionary gap or an
expansionary gap_expansionary gap ____________
Ca = 890

MPC = 0.5

IP = 220

(9pts)
G = 300

X-M = 20

y= 890 +.5(y-250)+220+300+20
y = 1430 + .5y 125
y = .5y +1305
.5y = 1305
y = 2610

3.

What is the problem associated with being at AD2 that makes policy makers concerned? (1pt)
__________Expansionary gap at AD2 making policy makers
Bring it closer to AD to reduce inflation___________________________

T = 250

4.

Who does fiscal and monetary policy? What are 2 fiscal policies and 3 monetary policies to correct a situation where the economy
is naturally at AD* but finds itself at AD2, as seen in the graph on the previous page. Briefly explain how each of these policies
would work to correct the situation. (12pts)
Who does fiscal policy: ______Congress _________________________
1.

____________increase taxes_________________________
________investments will slow down and increase growth
__________________________________________________________________________________
__________________________________________________________________________________________

2.

______increase consumption_______________________________
________will slow growth and investment bringing curve back to potential output
__________________________________________________________________________________
__________________________________________________________________________________________

Who does monetary policy: ________Federal Reserve _______________________

1.

_________Raise interest rate____________________________

____________decreases investment and growth increasing actual
output______________________________________________________________________________
__________________________________________________________________________________________

2.

______Raise reserve requirement_______________________________

_______slows growth and increases demand for money while tightening money supply.
___________________________________________________________________________________
__________________________________________________________________________________________

3.

______________sell bonds_______________________
____decreases money supply raising interest rates and slowing growth to make output reach potential
______________________________________________________________________________________
__________________________________________________________________________________________

5.

Use the excel sheets provided to complete this problem. Scenario 1: If the initial deposit into a bank is $5,000 and the reserve
requirement is 10% use formulas to fill in the chart all the way to completion (where there will be 0 for new deposits). Use
formulas and cell references whenever possible. Fix the cell references for the reserve requirement when entering your formulas

on the first line such that you can drag your information down the rows. Fixing a cell reference is done by putting dollar signs in
front of the cell row and column references ex. $B$3 this will mean that no matter where you copy that cell to it will always
refer to cell B3. For scenario 2, change the reserve requirement to 40%.

6.

7.

Create a third page of the excel spreadsheet and label it GDP. Enter in the data given below for 2012 U.S. expenditure numbers
and then create a pie chart with percentages. (Under Insert then click pie. When the graph comes up click Chart Tools, Design,
Quick Layout and
select a pie chart with percentages. Create your own
Consumption Expenditures
10362.3 selections for each piece of the pie and put a
personal color
Investment Expenditures
1763.8 the percentages.) Make sure to title your chart: GDP
background color on
Government
Expenditures
2974.7
2012 U.S.
Net Exports
-499.4

7.

Begin in equilibrium in each of the following graphs; draw the effects from question 2 above as they would apply in each graph
below. Next draw the effects of an anti-inflationary policy taken by the fed to correct the result from question 2 - use all three
graphs (Money Supply and Money Demand, AD/AS, and PAE). Explain what is happening in each graph and overall in the
economy as the due to the anti-inflationary policy. (20 pts)
Money Supply and Money Demand Graph
Nominal
Interest Rate
Aggregate
Demand and
Aggregate Supply

Money Supply Curve (MS)

PL

Real GDP

AS

AD

Money Demand (MD)

PAE

PAE

PAE = Y

45
Y