Suppose an economy can be represented by the following table, in which employment is in millions of workers and GDP and AE are expressed in billions of dollars: Real GDP Employment 100 105 110 115 120 125 1200 1300 1400 1500 1600 1700 Use the table to answer the following: Aggregate Expenditures 1275 1350 1425 1500 1575 1650 a. What is the equilibrium level of GDP? b. What kind of expenditure gap exists if full employment is 120 million workers? What is its size?
Suppose an economy can be represented by the following table, in which employment is in millions of workers and GDP and AE are expressed in billions of dollars: Real GDP Employment 100 105 110 115 120 125 1200 1300 1400 1500 1600 1700 Use the table to answer the following: Aggregate Expenditures 1275 1350 1425 1500 1575 1650 a. What is the equilibrium level of GDP? b. What kind of expenditure gap exists if full employment is 120 million workers? What is its size?
Chapter9: Demand-side Equilibrium: Unemployment Or Inflation?
Section: Chapter Questions
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Transcribed Image Text:Suppose an economy can be represented by the following table, in which employment is in millions of
workers and GDP and AE are expressed in billions of dollars:
Real GDP
Employment
100
105
110
115
120
125
1200
1300
1400
1500
1600
1700
Use the table to answer the following:
Aggregate Expenditures
1275
1350
1425
1500
1575
1650
a. What is the equilibrium level of GDP?
b. What kind of expenditure gap exists if full employment is 120 million workers? What is its
size?
c. Suppose government spending, taxes, and net exports are all independent of the level of real
GDP. What is the multiplier in this economy?
d.
Suppose instead that the economy is producing at equilibrium GDP. If this GDP is $200 billion
below the economy's potential, what is the size of the recessionary expenditure gap?
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