Assume the Level of Investment Is $12 Billion and Independent

question 11

Essay

Assume the level of investment is $12 billion and independent of the level of total output.Complete the following table and answer the following questions about this private closed economy. (a) What are the sizes of the MPC, MPS, and multiplier in this economy?
(b) If full employment in this economy is 110 million, will there be a recessionary or inflationary gap? Explain the consequences of this gap.(c) Using the multiplier concept, determine what change in investment is needed to eliminate the output gap.(d) If full employment in this economy is 80 million, will there be an inflationary or recessionary gap? Explain the consequences of this gap.(e) Using the multiplier concept, determine what change in investment is needed to eliminate the output gap from part (d).

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Definitions:

Deindividuation

A psychological state characterized by decreased self-awareness and a diminished sense of personal responsibility, often occurring in group settings.

Social Loafing

The phenomenon where individuals exert less effort to achieve a goal when they work in a group than when they work independently.

Business Managers

Individuals responsible for planning, organizing, leading, and overseeing the activities and operations in an organization.

Form Teams

The process of creating groups of individuals to work together towards a common goal or project.