1.In economy as a whole: A. wages must equal profit. B. consumption must equal s
ID: 1245317 • Letter: 1
Question
1.In economy as a whole:A. wages must equal profit. B. consumption must equal saving. C. income must equal expenditure. D. the number of buyers must equal the number of sellers. --------------------- 2. In the economy of Wrexington in 2008, consumption was $500, exports were $200, GDP was $1200, government purchases were $250, and investment was $300. What were Wrexington’s imports in 2008? (show work) ------------- 3. The consumer price index was 225 in 2006 and 236 in 2007. The nominal interest rate during this period was 6.5 percent. What was the real interest rate during this period? (show work) A. wages must equal profit. B. consumption must equal saving. C. income must equal expenditure. D. the number of buyers must equal the number of sellers. --------------------- 2. In the economy of Wrexington in 2008, consumption was $500, exports were $200, GDP was $1200, government purchases were $250, and investment was $300. What were Wrexington’s imports in 2008? (show work) ------------- 3. The consumer price index was 225 in 2006 and 236 in 2007. The nominal interest rate during this period was 6.5 percent. What was the real interest rate during this period? (show work) A. wages must equal profit. B. consumption must equal saving. C. income must equal expenditure. D. the number of buyers must equal the number of sellers.
Explanation / Answer
1) C income must equal expenditure 2) Y = C + I + G + (X - M) where Y is national income (i.e. GDP), C is consumption, I is investment, G is government spending, X is exports and M is imports. So, we have 1200 = 500 + 300 +250 + (200 - M) -----> M = 50 3) real interest = nominal / inflation = 1.065 / (236/225) 1.01536 So, about 1.5%
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