01: For this question consider the following table (14 points): GDP Investment G
ID: 1108210 • Letter: 0
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01: For this question consider the following table (14 points): GDP Investment Government Expenditure 120 Net Exports 3,600 3,700 3,800 3,900 4,000 3,220 3,310 3,400 3,490 3,580 240 240 240 240 240 40 40 40 40 40 120 120 120 120 a) Find equilibrium GDP b) Explain the market mechanism that drives the economy towards equilibrium if initially Aggregate Demand> Aggregate Supply c) Derive the consumption function. Provide some intuition on its components and especially point out if there is anything counterintuitive about it. d) Derive the savings function. e) Assume this economy hits a recession which leads to an increase in unemployment. Briefly explain the effects on Aggregate Consumption and GDP f In a classic piece of comedy Dave Chappelle (dressed as a fake anchorman) announces that Congress approved $1 Billion for African-Americans as a reparation payment for slavery. Briefly explain the effects on Aggregate Consumption and GDP (You don't need to know or watch the video in order to answer the question, in case you want to, URL: http://www.dailymotion.com/video/x2pveofExplanation / Answer
A) The equilbruim level of GDP = 3800
because, equilbruim GDP is Y =C +I +G +NX
3800 = 3400 +240 +120 +40
3800 = 3800
B ) if the aggregate demand > aggregate supply. then the market mechanism to decrease in input price or positive economic growth from an increase in productive resources such as labor and capital , increase the aggregate supply and hence the equilbruim level of GDP achieved.
C) COnsumtiption fucntion is the part of C = autonomous consumption and marginal propensity to consume.
consumption funciton = a + b(yd)
a =autonomous consumption.
b = marginal propensit to consume.
yd= disposable income.
D) Saving function is the part of income.
thus saving = income.
or saving fucntion is the marginal propensity to save. which is define as (1 - b) or (1 - marginal propensity to consume)
E and all. PLease uplaod it again. ( chegg policy)
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