1. Write down the equation used to represent the relationship
between GDP and the four major components of expenditures in GDP,
then briefly explain each component.
2. Using a graph of the market for loanable funds, briefly
explain the effects of each of the following on the real interest
rate, saving, and investment.
(a) A decrease in government spending
(b) An increase in the expanded profitability of new investment
in plant and equipment