Complete the following four questions.

1. Suppose a business owner is trying to decide whether to invest in a new piece of machinery.

The machine costs $160,000, and it is expected to generate revenue of $200,000.

a. Solve for the expected rate of return on this machine.

b. If the interest rate the business owner has to pay is 20%, will the business owner buy this machine?

c. If the interest rate the business owner has to pay is 25%, will the business owner buy this machine?

d. If the interest rate the business owner has to pay is 30%, will the business owner buy this machine?

2. In a given economy potential GDP is at $415,000. If equilibrium/actual GDP is

$300,000, determine how large of a recessionary gap this economy has. If the MPC is .8,

solve for how much investment spending alone will have to change to close this gap.

3. If the current equilibrium GDP value is $290,000 and investment spending decreases by

$40,000 with an MPC of 0.8, solve for the new equilibrium GDP.

4. Given the following income data, please answer the questions below:

Real GDP Consumption Ig Government Exports Imports

$150000 $170000 $9000 $8000 $6000 $13000

$250000 $260000 $9000 $8000 $6000 $13000

$350000 $350000 $9000 $8000 $6000 $13000

$450000 $440000 $9000 $8000 $6000 $13000

$550000 $530000 $9000 $8000 $6000 $13000

a. Solve for net exports in each row.

b. Solve for aggregate expenditures (AE) in each row.

c. State the value for the equilibrium GDP.

d. If imports were to increase by $20000 so they are now equal to $33000, solve for net exports again.

e. With this new export value, solve for aggregate expenditures in each row.

f. State the value for the new equilibrium GDP.

g. Solve for the multiplier (you can solve for either the actual or simple multiplier).