1 2. please, thank you! This table shows some information on a private closed ec

Question

1

2.

please, thank you!

This table shows some information on a private closed economy. A private closed economy is one that does not have a government and does no trade with the rest of the world. Therefore, the only components of aggregate expenditure are consumption (C) and planned investment spending (I). In this problem, assume that planned investment spending is independent of the economy's real GDP level. Also note that real GD is equal to disposable income in a private closed economy Unplanned Changes in Inventories -100 Tendency of Output Real GDP Consumption Saving 60 110 Investment Aggregate Expenditure 400 500 600 700 340 440 490 540 160 160 160 160 160 550 600 650 700 4 210 5 260 100 Using the numbers provided in the table, enter the missing numbers in the empty cells. Then, using the drop-down selection menus in the right-most column, indicate whether output will tend to rise, fall, or remain in equilibrium at each level of real GDP in the table. Note that the table uses negative numbers to indicate an unplanned decrease in inventories and positive numbers to indicate an unplanned increase in inventories True or False: The most fundamental assumption behind the aggregate expenditure model is that prices in the economy are flexible O False True When aggregate expenditure is less than real GDP, there is an unplanned inventories will cause the actual level of investment to be in business inventories. This unplanned change in than the planned level of investment (I), which will prompt firms to employment and production

Explanation / Answer

Real GDP Consumption Saving Investment Aggregate Expenditure Inventories Output

( Real GDP-Saving) (C + I) (Real GDP- AE)

400 340 60 160 500 -100 Rise

500 390 110 160 550 -50 Rise

600 440 160 160 600 0 Remain in equilibrium

700 490 210 160 650 50 Fall

800 540 260 160 700 100 Fall

False. The prices are assumed to be constant in this model.

Increase, Less, Reduce.

Answer 2:

Equilibrium output is 3200.

Reduction in output = Multiplier * fall in government Spending

= 1 / 1-MPC * -40

= 1/ 1-0.7 * -40

=- 133.33

Equilibrium output after fall in government spending = 3066.67

Spensing Multiplier = 3.33

Related Questions

Navigate

• Browse (All)
• Browse 1
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.