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ZAssume the level of investment is $8 billion and independent of the level of total output. Complete the following table and determine the equilibrium level of output and income which the private sector of this closed economy would provide. Possible omploymanloal GDP = Mommpon Saving Ell El] 100 11!} 12H 130 140 15!] 1E\" levels [millions] [billions] [billions] {buttons} $1210 $122 5 13B 130 _ 14o 133 _ 15:: 143 _ 1W 154 _ no 152 _ 124:: 170 _ too 175 _ 200 186 _ (a) If this economy has a labor force of 140 million, will there be a recessionary or inationary expenditure gap? Explain the consequences of this gap. (b) If the labor force is 110 million, will there be an inflationary or recessionary expenditure gap? Explain the consequences of this gap. (c) What are the sizes of the MPC, MP8, and multiplier in this economy? ((1) Using the multiplier concept, give the increase in equilibrium GDP that would occur if the level of investment increased from $8 billion to $10 billion. 1-The data in the first two columns below are for a private closed economy. Use this table to answer the following questions. Real GDP Aggregate Net Aggregate - DI exports expenditures (billions) (billions) expenditures Exports Imports (billions] (billions) (billions] (billions)" $100 $120 $10 $15 125 140 10 15 150 160 10 15 175 180 10 15 200 200 10 15 225 220 10 15 250 240 10 15 275 260 10 15 (a) What is the equilibrium GDP for the private closed economy? (b) Including the international trade figures for exports and imports, calculate net exports and determine the equilibrium GDP for a private open economy. (c) What will happen to equilibrium GDP if exports were $5 billion larger at each level of GDP? (d) What will happen to equilibrium GDP if exports remained at $10 billion, but imports dropped to $5 billion? (e) What is the size of the multiplier in this economy?1-Complete the accompanying table. Level of output and income (GDP = DI) ConsumptionSaving APC APS MPC MPS $100 -$5 125 150 5 175 10 200 15 225 20 250 25 275 30 300 35 (a) What is the break-even level of income? How is it possible for households to dissave at very low income levels? (b ) If the proportion of total income consumed decreases and the proportion saved increases as income rises, explain how the MPC and MPS can be constant at various levels of income. 2-Use the following data to answer the questions. Cumulative amount Expected rate of investment of return (billions) 11% $ 55 75 90 105 150 190 (a) Explain why this table is essentially an investment demand schedule. (b) If the interest rate was 8%, how much investment would be undertaken? (c ) Why is there an inverse relationship between the rate of interest and the amount of investment
