Name: Tobin Prince__(80 points total) Section: ___Tues/Thurs 0830__

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 (Planned Aggregate Expenditure)? Circle the largest component and fill in the chart. Under each put
the components and something unique. (19pts)

PAE = ___Consumer Expenditure____ + ___Investment Expenditure____ + __Government Expenditure__ + __Net Exports__
Components:
Circle the largest category
Components: Components: Government Components: Net Exports
1. Durable Goods Life
expectancy is greater than three
years.
1. New Construction 1. Goods 1. Imports
2. Non-Durable Less than
three years expectancy
2. Inventory 2. Services 2. Exports
3. Services (Biggest) 3. New Capital
Excludes:
1. Bonds
Excludes:
1. Tranfers
2. Interests on Debt
Its negative in our country

2. Given the following information, what is the short-run equilibrium output (show your work) ______3110____ What is the
autonomous expenditure _____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)_____increase______ and by how much ______20______ and will
it lead to a recessionary gap or an expansionary gap____Expansionary Gap___ (9pts)
C
a
= 890 MPC = 0.5 I
P
= 220 G = 300 X-M = 20 T = 250
Ca + Ip + G + (X-M) + MPC(Y-T-t(Y)) = PAE








What is the problem associated with being at AD
2
that makes policy makers concerned? (1pt)
____________Inflation________________








3. 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 with the President of the United States.
1. __Taxation
____When Congress increases the corporate taxes it causes businesses to slow down on the investment side of
things. This also increases cost and growth and prices will fall.
2. __Spending
________The regulation of consumption is a big factor in how businesses will thrive. If you increase
consumption then it slows growth and puts a shortage on investments. It also moves the line to the potential
output.
Who does monetary policy: _Federal Government (Reserve)
1. ___Bonds, Open Market Operations
____Selling bonds decreases money supply which raises interest rates and slows the rate of growth. The money
is taken out of the economy and it hopefully reaches its potential GDP.
2. ___Discount
____They can change the interest rates which can help with spending or help with savings. Raising the rates
causes a decrease in spending and investments. Growth is affected negatively and actual output approaches
potential output.
3. __Reserves
If they raise the reserve requirements then it affects the money supplied to the economy. It raises the demand
and the price of money, interest rates and it slows growth. On the other hand if they lower interest rates then the
money in the economy is spent more on investments and it raises inflation and growth in the economy