1. The table below contains data for the country of Wrexington for the year

2018.

Household purchases of durable goods $1293

Household purchases of nondurable goods $1717

Household purchases of services $301

Household purchases of new housing $704

Purchases of capital equipment $310

Inventory changes $374

Purchases of new structures $611

Depreciation $117

Salaries of government workers $1422

Government expenditures on public works $553

Transfer payments $777

Foreign purchases of domestically produced goods $88

Domestic purchases of foreign goods $120

Answer the following questions:

a. What was Wrexington's GDP in 2018? (2 Marks)

b. What were Wrexington's consumption in 2018? (2 Marks)

c. What were Wrexington's investment in 2018? (2 Marks)

d. What were Wrexington's government purchases in 2018? (2 Marks)

e. What were Wrexington's exports in 2018? (2 Marks)

f. What were Wrexington's imports in 2018? (2 Marks)

g. What were Wrexington's net exports in 2018? (2 Marks)

2. The table below contains data for the country of Wrexington for the year

2018.

Total income $5731

Household purchases of durable goods $1108

Household purchases of nondurable goods $702

Household purchases of non-education services $203

Household purchases of education services $302

Household purchases of new housing $816

Purchases of capital equipment $333

Inventory changes $75

Purchases of new structures $267

Depreciation $401

Local government spending on goods and services $236

State government spending on goods and services $419

Federal government spending on goods and services $1182

Transfer payments $707

Foreign purchases of domestically produced goods $217

Domestic purchases of foreign goods $129

Answer the following questions:

a. What was Wrexington's GDP in 2018? (2 Marks)

b. What were Wrexington's consumption in 2018? (2 Marks)

c. What were Wrexington's investment in 2018? (2 Marks)

d. What were Wrexington's government purchases in 2018? (2 Marks)

e. What were Wrexington's exports in 2018? (2 Marks)

f. What were Wrexington's imports in 2018? (2 Marks)

g. What were Wrexington's net exports in 2018? (2 Marks)

3. What is the difference between monetary policy and fiscal policy? (6 Marks)

4. Describe the process in the money market by which the interest rate reaches its equilibrium value if it

starts above equilibrium. (5 Marks)

5. Explain the logic according to liquidity preference theory by which an increase in the money supply

changes the aggregate demand curve. (5 Marks)

6. Suppose that the government increases expenditures by $150 billion while increasing taxes by $150

billion. Suppose that the MPC is .80 and that there are no crowding out or accelerator effects. What is

the combined effects of these changes? Why is the combined change not equal to zero? (6 Marks)