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In the table below, you will find information Bolivia's aggregate expenditure components and real GDP. Numbers are in millions. Government Aggregate Unplanned Real Real GDP
In the table below, you will find information Bolivia's aggregate expenditure components and real GDP. Numbers are in millions. Government Aggregate Unplanned Real Real GDP Consumption Planned purchases Expenditure change in GDP ( Y) (C Investment (1) (G) Exports Imports (AE) inventories will 35000 19500 5500 6000 8250 4000 36000 20250 5500 6000 8500 4250 37000 5500 6000 8750 4500 38000 5500 6000 9000 4750 1. Calculate the marginal propensity to consume (MPC) and then Multiplier. (4 points) 2. Fill in the blanks the second column. Keep in mind that consumption is increasing by a constant amount. (6 points) 3. Calculate aggregate expenditure (AE) and fill in the blanks the last column of the table. What is the equilibrium real GDP? How do you know? (4 points) 4. Investment is expected to increase by 430 because of positive expectations about future profitability. What will be the change in current equilibrium real GDP that will take place? What will be the new equilibrium real GDP? Use the concept of multiplier in your calculations. Show calculation steps. (8 points) 5. Government purchases multiplier is 3. If Bolivia's government wants to increase equilibrium real GDP from 36000 to 39000, how it should change the Government spending? Use the concept of multiplier in your calculations. Show calculation steps
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