Unformatted text preview: ‘I’ refers to capital investment, NOT financial investment i.e. stocks, bonds etc.) Examples for G: roads, arms ‘G’ refers to government spending, NOT government transfers (i.e. social security, unemployment, etc.) b) Equilibrium condition in the goods market: Z = Y When the goods market is in equilibrium the inventory investment is zero . Remember that inventory investment is the difference between production (Y) and sales (Z), and it will be zero in equilibrium because Y = Z (See Chapter 3, page 49) c) First, you need to remember that output equals income. Y = 1320 d) From part c) Y = 1320. The 3% increase in output is 1320 * .03 = 39.6; ∆ G = 19.8...
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- Fall '09
- Macroeconomics, equilibrium condition, Practice Exam Exercises