ps4 - Economics 205 Principles of Macroeconomics Mark Moore...

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Economics 205: Principles of Macroeconomics Mark Moore Fall 2007 Problem Set 4 1. Baumol and Blinder, Ch. 8 Appendix (p. 172 in 2007 Update), Test Yourself, problem 1. 2. Baumol and Blinder, Ch. 8 Appendix (p. 173 in 2007 Update), Test Yourself, problem 2. 3. Baumol and Blinder, Ch. 8 Appendix (p. 173 in 2007 Update), Discussion Questions, problem 2. 4. Why does the aggregate demand curve slope down (in Y-P space)?
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Economics 205: Principles of Macroeconomics Mark Moore Spring 2006 Problem Set 4: Solutions 1. a. Consumption increases by $18,000. b. Consumption increases by $18,000, but net exports fall by $18,000, so there is no effect on total GDP. c. No effect. d. Investment increases by $100 million. e. No effect. f. Investment (inventory investment) increases by $12,000,000. g. Consumption (of legal services) increases by $6,000. h. No effect. 2. Consumption 800 cars * $6000 = $4,800,000 food purchases = $14,000,000 $18,800,000 Investment 100 trucks * $8000 = $800,000 Net Exports 200*$6000 = $1,200,000 GDP = $18,800,000 + $800,000 + $1,200,000 = $20,800,000.
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