Economics (6th Edition)
Economics (6th Edition)
6th Edition
ISBN: 9780134105840
Author: R. Glenn Hubbard, Anthony Patrick O'Brien
Publisher: PEARSON
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Chapter 19, Problem 19.1.13PA
To determine

The Bureau of Economic Analysis.

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The magazine Women of China reported that Chinese women in big cities spent 63% of their income on consumer goods last year, up from a meagre 26% in 2007. Clothing accounted for the biggest chunk of that spending, at nearly 30%, followed by digital products such as cellphones and cameras (11%) and travel (10%). Chinese consumption as a whole grew faster than the overall economy in the first half of the year and is expected to reach 42% of GDP by 2020, up from the current 36%.  Source: The Wall Street Journal, August 27, 2010    If the economy had been operating at a full employment equilibrium, (a) Describe the macroeconomic equilibrium after the rise in consumer spending.  (b) Explain and draw a graph to illustrate how the economy can adjust in the long run to restore a full-employment equilibrium.
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