Saving, Billions a. Using the above consumption and saving data and assuming inv

Question

Saving, Billions

a. Using the above consumption and saving data and assuming investment is $11 billion, what are saving and planned investment at the $350 billion level of domestic output? Saving = $ billion. Planned investment = $ billion.

b. What are saving and actual investment at that level? Saving = $ billion. Actual investment = $ billion.

c. What are saving and planned investment at the $310 billion level of domestic output? Saving = $ billion. Planned investment = $ billion.

d. What are the levels of saving and actual investment? Saving = $ billion. Actual investment = $ billion.

e. In which direction and by what amount will unplanned investment change as the economy moves from the $350 billion level of GDP to the equilibrium level of real GDP? Unplanned inventories will by $ billion.

f. From the $310 billion level of real GDP to the equilibrium level of GDP? Unplanned inventories will by $ billion.

Possible Levels of Employment, In Millions Real Domestic Output, Billions Consumption, Billions Savings, Billion 35 230 239 -9 40 250 255 -5 45 270 271 -1 50 290 287 3 55 310 303 7 60 330 319 11 65 350 335 15 70 370 351 19 75 390 367 23

Explanation / Answer

a)

at the $350 billion level of domestic output, saving = $15 billion    and therefore planned investment which is equal to sdaving at equilibrium(Y=C+S) is also equal to $ 15 billion

b)

saving = 15 billion and actual investment= 11 billion which is not equal to plnnned investment

c)

Saving = $ 7 billion. Planned investment = $ 7 billion.

d) Saving = $ 7 billion. Actual investment = $ 11 billion.

e) equilibrium level of real GDP is achieved where

saving= plannned investment= actual investment = 11

which is achieved at GDP level of $330 billion

when economy moves from the $350 billion level of GDP to the $330 billion

Unplanned inventories will decrease by $ 4 billion.

f) From the $310 billion level of real GDP to the $330 billion

Unplanned inventories will increase by $ 4 billion.

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