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In: Economics

Answer the following questions: Consider the data below for a hypothetical economy. All figures are in...

Answer the following questions:

Consider the data below for a hypothetical economy. All figures are in billions of dollars.

Real Domestic Aggregate Aggregate

Output Expenditures (C + Ig), Expenditures (C + Ig + Xn),

(GDP = DI) Private, Closed Economy Exports, X Imports, M Private, Open Economy

($ Billions) ($ Billions) ($ Billions) ($ Billions) ($ Billions)

200 245 30 15 ________

250 280 30 15 ________

300 315 30 15 ________

350 350 30 15 ________

400 385 30 15 ________

450 420 30 15 ________

500 455 30 15 ________

Complete the above Table and clearly show your steps and calculations.

1. With the completed Table in (a) above, determine the:
equilibrium GDP of the private, open economy. Clearly show your steps and calculations.

(ii) net exports multiplier of the private, open economy. Clearly show your steps/calculations.

If full employment GDP for the open economy is $350 billion, will there be an inflationary expenditure gap or a recessionary expenditure gap in the economy? Why? What is the consequence of this expenditure gap on the economy?

Consider the following information for an economy:
Household Consumption, C = $40 billion + 0.8Y, where Y is real income ($ billion)

Planned Business Investment, Ig = $10 billion

Exports, X = $35 billion

Imports, M = $15 billion

Government Spending, G = $15 billion, and Taxes, T = $0.

Determine the economy’s equilibrium real GDP or income. Clearly show your steps and calculations.

Expert Solution

Rahul Sunny answered 2 years ago

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