a) If the equilibrium GDP for a private closed economy is RM550 million (see table above), what is the change in equilibrium GDP caused by the additional net exports when the private close economy is open? b) At an original RM35 million level of exports, what would be net exports and the equilibrium GDP if imports were RM10 million greater
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(1) Real domestic output (GDP=DI) millions |
(2) Aggregate Expenditures, private closed economy millions |
(3)
Exports/ millions |
(4)
Imports/ millions |
(5)
Net exports, private economy |
(6)
Aggregate expenditures, open millions |
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RM 350 RM 400 RM 450 RM 500 RM 550 RM 600 RM 650 RM 700 |
RM 390 RM 430 RM 470 RM 510 RM 550 RM 590 RM 630 RM 670 |
RM 35 RM 35 RM 35 RM 35 RM 35 RM 35 RM 35 RM 35 |
RM 45 RM 45 RM 45 RM 45 RM 45 RM 45 RM 45 RM 45 |
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a) If the equilibrium GDP for a private closed economy is RM550 million (see table above), what is the change in equilibrium GDP caused by the additional net exports when the private close economy is open?
b) At an original RM35 million level of exports, what would be net exports and the equilibrium GDP if imports were RM10 million greater at each level of GDP?
c) Explain how sticky prices relate to the aggregate expenditure model.
d) Explain the multiplier effect and draw a graph(OPTIONAL) to illustrate the effect of an increase in exports on equilibrium real GDP in the short run and long run.
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