a)
To compute: The equilibrium
a)
Answer to Problem 3TY
The equilibrium GDP has been derived as
Explanation of Solution
The monetary value of finished goods and services, being produced in a particular time frame, in an economy, is called the Gross Domestic Product or GDP.
The GDP is calculated as follows:
Where
By substituting the values in Eq (1), the equilibrium level of GDP can be calculated:
As the rate of interest is 8 percent and
Simplifying further by bringing the variable on to the left hand side:
Thus the equilibrium level of GDP has been derived as
When the total collected tax is greater than the expenditure by Government, then that budget is said to be surplus budget, and when the Governmental expenditures are more than the collected tax, then that budget is called a deficit budget. Therefore:
Surplus Budget
Deficit Budget
Wherein
Since it is negative value at
When the net export is positive it is called as a trade surplus and when it is negative it is called as a trade deficit. Following is the equation:
Since it is a negative value at
b)
The equilibrium GDP, the budget surplus or deficit and the trade surplus or deficit, as per the data given.
b)
Answer to Problem 3TY
The equilibrium GDP has been derived as
Explanation of Solution
The monetary value of finished goods and services, being produced in a particular time frame, in an economy, is called the Gross Domestic Product or GDP.
The GDP is calculated as follows:
Where
By substituting the values in Eq (1), the equilibrium level of GDP can be calculated:
As the rate of interest is 8 percent and
Simplifying further by bringing the variable on to the left hand side:
Thus the equilibrium level of GDP has been derived as
When the total collected tax is greater than the expenditure by Government, then that budget is said to be surplus budget, and when the Governmental expenditures are more than the collected tax, then that budget is called a deficit budget. Therefore:
Surplus Budget
Deficit Budget
Wherein
Since it is negative value at
When the net export is positive it is called as a trade surplus and when it is negative it is called as a trade deficit. Following is the equation:
Since it is a negative value at
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Chapter 20 Solutions
MACROECON LOOSE-LEAF W/MINTAP
- Answer the question on the basis of the following table for a particular country in which C is consumption expenditures, Ig is gross investment expenditures, G is government expenditures, X is exports, and M is imports. All figures are in billions of dollars. Each question is independent of other question using the same table, unless otherwise stated. Price Level C Ig G X M Real GDP 128 $18 $2 $3 $1 $5 125 $20 $4 $3 $2 $4 122 $22 $6 $3 $3 $3 119 $24 $8 $3 $4 $2 116 $26 $10 $3 $5 $1 Refer to the table. The real-balances effect of changes in the price level is: Group of answer choices shown by columns (1) and (5) of the table. shown by columns (1) and (4) of the table. not shown by the data in the table. shown by columns (1) and (2) of the table.arrow_forwardClassify each of the following items as a final good or service or an intermediate good or service, and identify which is a component of consumption expenditure, investment, or government expenditure on goods and services. A. A textbook bought by a student B. A computer purchased for a senator's office C. New cars bought by Hertz, the car rental firm D. Aluminum sheets bought by Boeing 1. A is a final good that is consumption expenditure, B is a final good that is government expenditure, C is a final good that is investment, and D is an intermediate good. 2. A is a final good that is investment, B is an intermediate good, C is a final good that is investment, and D is an intermediate good. 3. A is a final good that is consumption expenditure, B is an intermediate good, C is a final good that is consumption expenditure, and D is a final good that is investment. 4. A is a final good that is consumption expenditure, B is a final good…arrow_forwardDifferentiate between an induced increase in consumption and in autonomous increase in consumption how are they represented on a grapharrow_forward
- Consider the following model of an economy with no international trade, and in which the price level is fixed: C = 40 + (8/9)∙DI I = 30 G = 30 Taxes = (1/8)∙GDP where C is consumption demand, DI is disposable income, I is planned investment, G is government purchases, and all whole numbers are in billions of dollars. Determine the equilibrium level of production (GDP) in this economy (show your work), and draw this equilibrium situation on a graph. Use the multiplier to determine the change in equilibrium GDP that would result from an exogenous 16 billion dollar increase of government purchases. Then determine…arrow_forwardExplain how each of the following will affect the consumption and saving schedules (as they relate to GDP) or the investment schedule, other things equal: A large increase in the value of real estate, including private houses A decline in real estate rate A sharp, sustained decline in stock prices. An increase in the rate of population growth. The development of a cheaper method of manufacturing computer chips. A sizable increase in the retirement age for collecting Social Security benefits. An increase in the Federal personal income tax.arrow_forwardWhich of the following correctly describes how a decrease in the price level affects consumption spending? Select one: a. A decrease in the price level raises real wealth, which causes consumption to increase. b. A decrease in the price level decreases the amount of money a household needs to buy goods and so raises the interest rate, which causes consumption to increase. c. A decrease in the price level increases the amount of money a household needs to buy goods and so raises the interest rate, which causes consumption to increase. d. A decrease in the price level lowers real wealth, which causes consumption to decrease.arrow_forward
- In the future report of U.S. Gross Domestic Product (GDP) for Quarter 1 of 2023, which of the following would not be an example of an expenditure that would contribute to an increase in the level of GDP in Q1 of 2023? [note: focus on the direct impact of each of the choices below] Group of answer choices U.S. household spending on home appliances increases by 0.5% in 2023:Q1 Business investment spending on industrial equipment rises by 2% in 2023:Q1 U.S. Federal government interest payments rise by $120 billion in 2023:Q4 U.S. consumer spending on domestic air travel increases by 8% in 2023:Q1. None of the choices listed because all would contribute to an increase in real GDP in 2023:Q1.arrow_forwardFrom the table below answer, the following questions in the spaces provided, consider the following data (in billion $) for a country in a particular year: (Personal consumption expenditure (C 1000 (Exports (x 120 (Government Purchases of goods and services (G 400 (Imports (m 110 Gross Domestic Product (Y) 4,500 (Taxes (T 200 5) What is the value of gross investment (I)? Answer 6) What is the amount of investment financed by national savings? Answer 7) What is the amount of investment financed by borrowing from or lending to the rest of the world? Answerarrow_forwardQ-1. when is a country said to move into a recession? Select one: a. If actual output falls below the trend level of output b If actual output falls below the potential level of output c. If actual output falls for two consecutive quarters of a year d If actual output falls Q-2. The equation for GDP using the expenditure approach is Select one: a. GDP=C+I+G +( IM-EX). b. GDP=C+I+G-EX-IM c. GDP=C+I+G+ (EX-IM) d. GDP=C+I+G + EX +IM. just give answerneed 100 percent perfect answer asap.arrow_forward
- List the components of GDP in the output (expenditures) approach. Please calculate the growth rate based on the following information: U.S. GDP 2022 = 22.1 trillion dollars U.S. GDP 2021 = 20.3 trillion dollars U.S. GDP 2020 = 19.1 trillion dollars What is the growth rate between 2021 and 2022? What is the growth rate between 2020 and 2022? Using Google, what are the 2021 GDP for the following countries: Vietnam, Indonesia, Brazil and Russia? Compare the GDPs from question 3 to the U.S. and provide your analysis?arrow_forwardThe private consumption of Macroland is given by C=500+0.75Y and the private investment function is given by I=400−1000r, where r is the interest rate and Y is the GDP. The planned aggregate expenditure can therefore be written as PE=C+I=900+0.75Y−1000r. The equilibrium in the goods and services market happens when the planned expenditure is equal to the actual expenditure, or PE=Y Find the equilibrium GDP by solving the system of equations PE=900+0.75Y-1000r PE= Y for Y and PE. Note your solutions will depend on r! 1. Plot your solution for Y in a diagram measuring Y on the horizontal axis and r on the vertical axis. This curve is called the IS curve.arrow_forwardIn an economy, consumers spend 800 million regardless of their level of disposable income. In addition, they spend 75% of their yearly disposable income. * Investment is fixed at 250 million, Gvt expenditures are 120 million, net taxes are 100 million, exports are 170 million. Imports are 15% of the level of disposable income. Q, what is this economies equilibrium level of output Q how much would net export be when this economy is at equilibrium outputarrow_forward