Chapter_9_Key_Question_Solutions

Chapter_9_Key_Question_Solutions - 9-2(Key Question)...

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Unformatted text preview: 9-2(Key Question) Assuming the level of investment is $16 billion and independent of the level of total output, complete the following table and determine the equilibrium levels of output and employment in this private closed economy. What are the sizes of the MPC and MPS?Possible levelsof employment(millions)Real domesticoutput (GDP=DI)(billions)Consumption(billions)Saving(billions)404550556065707580$240260280300320340360380400$244260276292308324340356372$ _____$ _____$ _____$ _____$ _____$ _____$ _____$ _____$ _____Saving data for completing the table (top to bottom): $-4; $0; $4; $8; $12; $16; $20; $24; $28.Equilibrium GDP = $340 billion, determined where (1) aggregate expenditures equal GDP (C of $324 billion + Iof $16 billion = GDP of $340 billion); or (2) where planned I = S(Iof $16 billion = Sof $16 billion). Equilibrium level of employment = 65 million; MPC = .8; MPS = .2.9-9(Key Question) The data in columns 1 and 2 of the table below are for a private closed economy.(1)Realdomesticoutput(GDP=DI)billions(2)AggregateExpenditures,private closedeconomy,billions(3)Exports,billions(4)Imports,billions(5)Netexports,privateeconomy(6)Aggregateexpenditures,openbillions$200$250$300$350$400$450$500$550$240$280$320$360$400$440$480$520$20$20$20$20$20$20$20$20$30$30$30$30$30$30$30$30$ _____$ _____$ _____$ _____$ _____$ _____$ _____$ _____$ _____$ _____$ _____$ _____$ _____$ _____$ _____$ _____a.Use columns 1 and 2 to determine the equilibrium GDP for this hypothetical economy.b.Now open up this economy to international trade by including the export and import...
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This note was uploaded on 07/14/2010 for the course ECON 1 taught by Professor Bergstrom during the Fall '07 term at UCSB.

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Chapter_9_Key_Question_Solutions - 9-2(Key Question)...

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