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April 24, 2014

Homework Help: economics please help

Posted by britney on Friday, November 3, 2006 at 10:08am.

this is a table with some questions and i don't know how to solve it

(1)real domestic output (GDP=DI) in billions
$200
$250
$300
$350
$400
$450
$500
$550
(2)aggregate expenditures private closed economy billions
$240
$280
$320
$360
$400
$440
$480
$520
(3)exports billions
$20
$20
$20
$20
$20
$20
$20
$20
(4)imports billions
$30
$30
$30
$30
$30
$30
$30
$30
(5)net exports private economy
??
??
??
??
??
??
??
??
(6)aggregate expenditures open,billions
??
??
??
??
??
??
??
??
??
the 1 question is use columns 1and 2 to determine the equilibrium GDP for this hypothetical economy.
2.fill in columns 5 and 6 to dtermine the equilibrium GDP for the open economy.
3. Given the original $20 billion level of exports, what would be the equilibrium GDP if imports were $10 billion greter at each level of GDP?
4. What is the multiplier in this example?

I am confused with your tables. I hope I am interpreting them correctly

I presume your first bank of numbers, labled GDP=DI are various possible levels of total output. In this example GDP=DI. Your second bank of number are levels of aggregate spending (Consumption) associated with each of these levels of disposable income. So, at 200 GDP, consumption is 240 -- meaning dis-savings is -40.

I presume there are no desired investments in this example. So, equilibrium occurs when Consumption = disposable income. $400
Note that when income rises by $50, consumption rises by 40. This means the MPC=40/50 = .8, which means MPS=.2. The multiplier is 1/mps = 1/.2 = 5.0

Now layer in the fact you have $10 net imports (-10 net exports). Using the multiplier, GDP should fall by 5*10 = $50

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