The table below illustrates the real domestic product, and the level of employme

Question

The table below illustrates the real domestic product, and the level of employment to produce each level of output, and aggregate expenditure based upon each level of the output (the real domestic product). For example, economy should employs 80 mil workers to produce GDP of $500 bil and at that level of GDP, aggregate expenditure is $560 bil. Economy should employs 100 mil workers to produce GDP of $600 bil. and at that level of GDP, aggregate expenditure is S630 bil.. # employment Real Domestic Aggregate Expenditures (unit mil.) Output (unit: bil) (C+G+NX) (unit: bil) 80 100 120 145 170 $500 600 700 800 900 S540 620 700 780 860

Explanation / Answer

Since US exports to India will increase, NX (part of AE) will increase.

This makes AE increase by 40 at each level of employment.

Equilibrium occurs at the point Y = AE

This new equilibrium occurs at Y = AE' = 900 and employment of 170 workers.

Original equilibrium: Y = AE = 700 at 120 workers employed.

More workers required = 170 - 120 = 50 more workers

Thus correct option is (d) 900 ; 50 more workers

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