In: Economics
Assume the economy in the United States has a break-even point of $4,500 billion. Businesses plan to Invest $78 billion. Government purchases $864 billion worth of goods and services. Exports are $458 billion. Imports are $432 billion and Net Exports is $26 billion. For every one dollar change in disposable income, households spend 75 cents. The labor force in this economy is 154,432,000. The population is 265,752,000. 9,765,000 people are not working but actively seeking work.
Answer:
MPC is change in consumption with change in disposable income.
Hence, For every $1, household spends 75 cents.
So MPC = 0.75
Answer: 2
MPS = 1 - MPC
=1-0.75
=0.25
Multiplier = 1/MPS = 1/0.25 = 4
Answer: 3
GDP =C+I+G+ NX
where C consumption = 75* DI (DI = Disposable Income) = 75* 4500
i = investment expenditure = 78
G = Government spending = 864
NX = export import = 26
Equilibrium GDP = $4,343
Asnwer: 4
NRU - Natural Rate of Unemployment
ARU = 3.67% =9,765,000/265,752,000
Potential GDP = (1-NRU) / (1-ARU)*GDP
= (1-5%)/(1-3.67%)*4343
=59.96