Assume the Level of Investment Is $8 Billion and Independent

question 33

Essay

Assume the level of investment is $8 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 140 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 110 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:

Nominal Specification

The stated or targeted value for a parameter in a design or process, serving as a benchmark for quality control.

Statistical Process Control

A methodology applied to monitor and control a process to ensure that it operates at its fullest potential, using statistical techniques.

Process Capability Index

A statistical measure of a process's ability to produce output within specified limits.