Spencer McAllister

Section: _041___________

E-Portfolio Signature Assignment

Salt Lake Community College Macroeconomics - Econ 2020 Professor: Heather A Schumacker
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) Planned Aggregate Expenditure!

Components: Consumption (C)

Components: Investment

Components: Government Spending

Components: Exports-Imports

1.Durable 2.Non-Durable 3. Services

1. Capital/Investment Goods 2. New Construction 3.Inventory Excludes: 1. Stocks and Bonds

1. Goods 2. Services

1. Imports 2. Exports

Excludes: 1. Social Security Benefits 2. Interest on Debt

PAE = Consumption +

Investment +

Government Spending +

Exports-Imports

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 ___.5____ what is the multiplier ______1/1-.5=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___ (9pts) Ca = 890 Autonomous Consumption MPC = 0.5 Marginal Propensity to Consume IP = 220 Planned Investment G = 300 Government Spending X-M = 20 Net Exports T = 250 Autonomous Taxes

PAE = Ca + MPC(Y-Ta-t(Y)) + I + G + (X-M) 890 + 0.5(Y-250) + 220 + 300 + 20 PAE = 1430 + 0.5Y - 125 Y = 1305 = .5Y Y = 2,610 3. What is the problem associated with being at AD2 that makes policy makers concerned? (1pt) ____Expansionary gap that will lead to Inflation____

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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 and the President 1. Government Spending: Decrease in Government spending would decrease overall GDP by putting less money Into the economy. At the same time Inflation will see a decrease when people have less to spend 2. Taxes: An increase in taxes leads to a decrease in consumer spending because people will have less disposable income. This will cause deflation.

Who does monetary policy: The Federal Reserve: 1. Reserve Requirement : Increase reserve requirement set by the Fed; a higher reserve requirement implies that banks lend out a smaller amount of their deposits in each round of lending and redeposit which limits the overall expansion of loans and deposits. When the reserve requirement increases, the money multiplier decreases which leads to less money creation. 2. Discount Rate: An increase in the discount rate shows that borrowing reserves will be harder and will tend to contract excess reserves. This decreases the quantity of reserves in the banking system, leading in decreases in the bank deposits and the money supply. 3. Open Market Operations: Open Market Sale The sale by the Fed of government bonds to the public for the purpose of reducing bank reserves and the money supply, lowering ciculation. 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)

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) Consumption Expenditures Investment Expenditures Government Expenditures Net Exports 10362.3 1763.8 2974.7 -499.4

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