Domestic Output or Income (GDP-DI) $240 250 260 270 280 290 300 310 320 consumpt
ID: 1108490 • Letter: D
Question
Domestic Output or Income (GDP-DI) $240 250 260 270 280 290 300 310 320 consumption $244 . 250 256 262 268 274 280 286 292 table above. Assume all figures are in billions of dollars. If there is no investment in this 33. Refer to the private closed economy, the equilibrium level of GDP will be: A. $240 billion B. $250 billion C. $260 billion D. $270 billion 34. Which of the following statements is correct? A. An increase in exports will decrease GDP and an increase in imports will increase GDP B. An increase in exports and imports will both increase equilibrium GDP C. An increase in exports and imports will both decrease equilibrium GDP. D. An increase in exports will increase GDP and an increase in imports will decrease GDP.Explanation / Answer
Ans33.
B
Equilibrium level of GDP will be at $250 billion.
Since it's a closed economy where investment is zero. Level of income is denoted as Y and consumption as C. The equation of closed economy is Y=C+I.
When Y= 240$ the C =244$
When Y=$250 then C=$ 250
When Y=$260 then C = $256
When Y=$270 then C=$262
So, according to the question investment are not there that means investment is 0.
When Y =250$ then consumption is also 250$, satisfying the equation Y=C.
Ans 34.
D
When country exports goods and services i. e sells them to foreign market such as consumers or governments in other countries. Exports bring money in domestic countries. It increases economic growth of country leading to increase in GDP of economy.
Whereas when domestic country imports from foreign countries, it means domestic countries are buying goods and services from foreign countries. That means money is being spent on them, thereby decreasing countries GDP.
Therefore right option is D. Where increase in exports will increase GDP of domestic country and increase in imports will decrease GDP of country.
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