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Name:----------------------Austin Refford (80 points total) Section: 2

E-Portfolio Signature Assignment

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

Please type your answers to the following questions. If you need to hand draw the graphs and then scan them in you may. When you have completed this assignment post it to your e-portfolio. Make sure to put your reflection statement on your web site. (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 = Consumption + Investment + Government Spending + (Exports - Imports)

Components: Consumption

Components: Investment

Components: Government Spending

Components: (Exports - Imports)

1.Autonomous Consumption

1.New Capital

1.Allocation Needs

1.Absolute Advantage

2.Induced Consumption

2.New Construction

2.Distribution Needs

2. Law of Comparative Advantage

3.Taxation

3. Inventories

Stabilization Needs

Excludes: 1.Current income

Excludes: 1. Interest on debt 2.Transfer payments

2.

Given the following information, what is the short-run equilibrium output (show your work)

Output is 2610. What is the autonomous expenditure Ca is 1305. what is the induced expenditure 0.5Y. where would it cross the Y axis 1305 what is the slope of PAE 0.5 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) Expansionary gap and by how much 20 and will it lead to a recessionary gap or an expansionary gap Ca = 890 X-M = 20 MPC = 0.5 T = 250 1/1-0.5=2 (9pts) IP = 220 G = 300

890+220+300+20+0.5(Y-250)=PAE 1430+0.5Y-125 1305=0.5Y 1305/0.5= 2610= Y

3.

What is the problem associated with being at AD2 that makes policy makers concerned?

(1pt) Expansionary gap

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: Government spending and taxes control this policy 1. Fiscal Stimulus

Tax cuts and spending that increases AD (Aggregate Demand) 2. Fiscal Restraint

Tax hikes and spending cuts reduce AD. Who does monetary policy: The Federal Reserve 1. Expansionary

This creates more money to allow AD to shift to the right, causing the Real GDP to rise. This will fix unemployment and recession issues. 2. Restrictive This will have reserves decreased, allowing inflation to fall. 3. Discretionary

This shows that the economy is unstable and needs constant adjustment.

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 new deposits). 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. For scenario 2, change the reserve requirement to 40%. (10 pts)

Consumption Expenditures Investment Expenditures Government Expenditures Net Exports

10362.3 1763.8 2974.7 -499.4

6. Create a third page of the excel spreadsheet and label it GDP. Enter in the data given below for 2010 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 personal color selections for each piece of the pie and put a background color on the percentages.) Make sure to title your chart: GDP 2012 U.S. (5pts)

7. 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)