Answered: (1) (2) Aggregate Expenditures, Private…

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter18: Savings,investment And The Financial System

Section18.2: Saving And Investment In The National Income Accounts

Problem 2QQ

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Question

The data in columns 1 and 2 in the accompanying table are for a private closed economy:
a. Use columns 1 and 2 to determine the equilibrium GDP for this hypothetical economy. b. Now open up this economy to international trade by including the export and import figures of columns 3 and 4. Fill in columns 5 and 6 and determine the equilibrium GDP for the open economy. Explain why this equilibrium GDP differs from that of the closed economy.
c. Given the original $20 billion level of exports, what would be net exports and the equilibrium GDP if imports were $10 billion greater at each level of GDP?
d. What is the multiplier in this example?

(1)
(2)
Aggregate
Expenditures, Private
Closed Economy,
(6)
Aggregate
Expenditures, Private
Open Economy,
Real Domestic
(5)
Output
(GDP = DI),
(3)
Exports,
(4)
Imports,
Net
Exports,
Billions
Billions
Billions
Billions
Billions
Billions
$200
$240
$20
$30
$
$
250
280
20
30
300
320
20
30
350
360
20
30
400
400
20
30
450
440
20
30
500
480
20
30
550
520
20
30

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