Name:_Sean Robertson________________________ (80 points total) Section: ____________

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_____ + _____investments_ +Government spending_______ + (export imports)
Components:
Circle the largest category
Components: Components: Components:
1.Durable - car 1.Business fixed investments
Factory
1.Goods 1. Exports
2.Nondurable food 2.Residential fixed investment
new home
2. Services 2. Imports
3.Servicesv-education 3.Inventory investment
software

Excludes:
1.stocks and bonds
Excludes:
1. Social security
2.Intrest paid on US debt


2. Given the following information, what is the short-run equilibrium output (show your work) ____2610____ What is the
autonomous expenditure ___1305__________ what is the induced expenditure ______.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)_increase______ and by how much
_________________ and will it lead to a recessionary gap or an expansionary gap expansionary____ (9pts)
C
a
= 890 MPC = 0.5 I
P
= 220 G = 300 X-M = 20 T = 250
890 + 220 + 300 + 20+ .5(Y-250) = PAE = 1305 >5y
1305 + .5y
1305 = .5y
1305/.5
2610

1/(1-.5) = 2






3. What is the problem associated with being at AD
2
that makes policy makers concerned? (1pt)
to much AD causes Inflation_________________









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 AD
2
, 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. They spend more than they collect in taxes_____________________________________
They spend more to help the aggregate demand____________________________________________________
2. Decrease taxes_____________________________________
Households get more income to help stimulate the
economy______________________________________________________________________________
Who does monetary policy: The Federal Reserve_______________________________
1. Buys Bonds_____________________________________
Increase the money supply, which lower the interest rate and make consumer spend
more_____________________________________________________________________________________
2. Lower Discount rates_____________________________________
Consumers and firms are willing to borrow and
spend_____________________________________________________________________________________
3. Lower Reserve requirement_____________________________________
Banks are allowed to lend more causing more money in the
economy__________________________________________________________________________________

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)

P
L

Real GDP
Aggregate Demand and
Aggregate Supply
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. 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)

















PAE

PAE = Y









45

Y

The fed bought bonds to help stimulate economy, this added money to the economy increasing the purchasing power of consumer.
This will stabilize inflation increasing the firms rate of production. This means aggregate supply increases.

Consumption Expenditures 10362.3
Investment Expenditures 1763.8
Government Expenditures 2974.7
Net Exports -499.4
Nominal Interest Rate

Money Supply Curve (MS)




i





Money Demand (MD)
Money Supply and Money Demand Graph
AS
AD
PAE