After you have studied Economics in the News on pp. 734–735, answer the following questions about the second quarter of 2020.

a. What was the planned change in inventories when the unplanned change in inventories was

$400 billion ($0.4 trillion)?

b. The BEA data show that exports of goods and services decreased by $568 billion and imports of goods and services decreased by

$645 billion. Were these changes in exports and imports changes in autonomous expenditure or changes in induced expenditure, and how do they influence the magnitude of the multiplier?

c. Using the assumptions made in Fig. 2 on p. 735, what is the value of the autonomous expenditure multiplier?

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The BEA news release reports that real GDP decreased in the second quarter of 2020 at a record rate and every component of aggregate expenditure fell except govern- ment expenditure. Business inventories decreased by $287 billion. Table 1 shows the real GDP and aggregate expenditure numbers for the first two quarters of 2020 along with the change in the second quarter. Figure 1 shows the changes in inventories and real GDP during 2020. Some inventory changes are planned and some are unplanned. Figure 2 interprets the data for 2020 Q1 and Q2 using the Keynesian model of equilibrium expenditure. Change in real GDP (billions of 2012 dollars) 1,500. 1,000. 500. -500. -1,000. -1,500. -2,000 Figure 1 Inventories and Real GDP 300 200 100 0 -100 -200 -300 -400 20/Q1 20/Q2 20/Q3 20/Q4 21/Q1 Year/quarter Change in inventories (billions of 2012 dollars)