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Q3. (25pts) Planned Government Real GDP Consumption Investment Purchases Net Exports $5,000 $4,500 $500 $325 -125 6,000 5,300 $500 $325 -125 7,000 6,100 $500
Q3. (25pts) Planned Government Real GDP Consumption Investment Purchases Net Exports $5,000 $4,500 $500 $325 -125 6,000 5,300 $500 $325 -125 7,000 6,100 $500 $325 -125 8,000 6,900 $500 $325 -125 a) Answer the questions based on the table below. The values are in millions of dollars. (15pts) i. What is the equilibrium level of real GDP? ii. iii. iv. What is the MPC? If potential GDP is $7,000 million, is the economy at full employment? If not, what is the condition of the economy? If the economy is not at full employment, by how much should government spending increase so that the economy can move to the full employment level of GDP? b) Suppose autonomous consumption in an economy is $3 trillion, the MPC is 0.8, government spending is $700 billion, investment equals $600 billion, and net exports equal -100 billion. Calculate the equilibrium output value for this economy. (10pts) Real Aggregate Expenditures ($) 7,000 AP 6,000 5,000 4,000 3,000 2,000 1,000 AE 1,000 2,000 3,000 4,000 5,000 6,000 7,000 Real Income ($) Q4. Answer the questions below based on the graph. (5pts) i. ii. iii. iv. What is the value of autonomous expenditures? What is the marginal propensity to consume? What is the slope of the AE line? When income is $3,000, what are the expenditures?
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