# 1. Aggregate Expenditure and IncomeThe following table shows consumption (C), investment (I), government purchases (G), and net exports (X - IM) in a hypothetical economy for various levels of real GDP (Y). Assume that the price level remains unchanged at all levels of income. All figures are in billions of dollars.**Compute total expenditure for each income level, and fill in the last column in the following table.**| Y | C | I | G | X - IM | Total Expenditure ||-----|-----|-----|-----|--------|-------------------|| 500 | 525 | 250 | 150 | -200 | || 600 | 550 | 250 | 150 | -200 | || 700 | 575 | 250 | 150 | -200 | || 800 | 600 | 250 | 150 | -200 | || 900 | 625 | 250 | 150 | -200 | |The following graph shows income (Y) on the horizontal axis and total expenditure (TE) on the vertical axis. The grey line represents a 45-degree $Y = TE$ line.Use the blue points (circle symbol) to plot the total expenditure line for this economy at an income of $500 billion, $600 billion, $700 billion, $800 billion, and $900 billion.**Note:** Plot your points in the order in which you would like them connected. Line segments will connect the points automatically.The graph includes:- **Axes:** The horizontal axis represents income (Y) in billions of dollars, while the vertical axis represents total expenditure (TE) in billions of dollars.- **Grey Line:** A 45-degree line indicating $Y = TE$.- **Points and Line:** Indicating total expenditure at various income levels, which can be plotted using given data points.- **Labels:** "TE line" marker and an "Equilibrium GDP" point at the intersection of the plotted line with the 45-degree line. **Graph Explanation:**This image contains a graph depicting the relationship between Real GDP and Real Expenditure. The x-axis represents Real GDP in billions of dollars, ranging from 400 to 1000. The y-axis shows Real Expenditure, also in billions of dollars, ranging from 400 to 1000. A straight line, labeled as the "TE line" (Total Expenditure line), runs diagonally from the bottom left to the top right, indicating a direct relationship between Real GDP and Real Expenditure.A point marked "Equilibrium GDP" with a plus symbol is intended to be placed where total expenditure equals total income, indicating the equilibrium in the economy.**Instructions and Notes:**- **Plot Instructions:** Plot your points in the order in which you would like them connected. Line segments will connect the points automatically. - **Use of Black Point:** The black point (plus symbol) is used to indicate the equilibrium in this economy, where total expenditure and income are equal.- **Drop Lines:** Dashed drop lines will automatically extend to both axes.**Scenario Analysis:**- **Current Real GDP:** Suppose the real GDP is currently $500 billion. Assuming the price level remains constant, this would mean that [dropdown needed], which would send a signal to firms to [dropdown needed].- **Marginal Propensity to Consume (MPC):** The MPC for this economy is [dropdown needed], and the oversimplified multiplier for this economy equals [dropdown needed].

The current value of all finished goods and services in the economy is defined as aggregate…

1. Aggregate expenditure and income The following table shows consumption (C), investment (I), government purchases (G), and net exports (X-IM) in a hypothetical economy for various levels of real GDP (Y). Assume that the price level remains unchanged at all levels of income. All figures are in billions of dollars. Compute total expenditure for each income level, and fill in the last column in the following table. Y C I G X-IM Total Expenditure 500 525 250 150 -200 600 550 250 150 -200 700 575 250 150 -200 800 600 250 150 900 625 250 150 -200 -200 1000 C The following graph shows income (Y) on the horizontal axis and total expenditure (TE) on the vertical axis. The grey line represents a 45-degree (Y = TE) line. Use the blue points (circle symbol) to plot the total expenditure line for this economy at an income of $500 billion, $600 billion, $700 billion, $800 billion, and $900 billion. Note: Plot your points in the order in which you would like them connected. Line segments will connect the points automatically.

1. Aggregate expenditure and income The following table shows consumption (C), investment (I), government purchases (G), and net exports (X-IM) in a hypothetical economy for various levels of real GDP (Y). Assume that the price level remains unchanged at all levels of income. All figures are in billions of dollars. Compute total expenditure for each income level, and fill in the last column in the following table. Y C I G X-IM Total Expenditure 500 525 250 150 -200 600 550 250 150 -200 700 575 250 150 -200 800 600 250 150 900 625 250 150 -200 -200 1000 C The following graph shows income (Y) on the horizontal axis and total expenditure (TE) on the vertical axis. The grey line represents a 45-degree (Y = TE) line. Use the blue points (circle symbol) to plot the total expenditure line for this economy at an income of $500 billion, $600 billion, $700 billion, $800 billion, and $900 billion. Note: Plot your points in the order in which you would like them connected. Line segments will connect the points automatically.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Definition of GDP and explanation of why this is equal to national income [ an explanation of how expenditure approach and income approach to GDP are related ]
Please answer the question in 1-2 paragraphs and minimum 100 words and maximum 200 words. Cheers.
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2. During recessions, central banks tend to cut interest rates. You are interested in understanding the question of how interest rates affect GDP. You look in the data and see that interest rates tend to be low when GDP is low (i.e. the interest rate is pro-cyclical). Why do you think this simple correlation might give a misleading sense of the effect of changes in the interest rate on GDP? How might a model help you answer this question?
Real GDP (dollars) 3,000 4,000 5,000 6,000 7,000 8,000 Consumption expenditure (dollars) 2,500 3,250 4,000 4,750 5,500 6,250 Investment (dollars) 500 500 500 500 500 500 Government expenditure (dollars) 500 500 500 500 500 500 In the above table, there are no taxes and no imports or exports The equilibrium level of expenditure for this economy is OA. no level because consumption expenditure is always less than real GDP B. $3,000 C. any level because investment always equals government expenditures OD. $5,000 www
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2. From what was learned in class, explain what the values of the slope and vertical intercept of the aggregate consumption function mean from an economic perspective. Income-expenditure equilibrium Using the data in the following table to complete the following questions. GDP YD Planned (billions of dollars) $0 $0 $200 $100 400 400 500 100 800 800 800 100 1,200 1,200 1,100 100 1,600 1,600 1,400 100 2,000 2,000 1,700 100 2,500 2,500 2,000 100 3,000 3.000 2,300 100 1. Complete the columns for AEPlanned and unplanned in the table. 2. What is the value of the MPC? 3. What is the aggregate consumption function? AE Planned Unplanned 4. What is the equation for the planned aggregate expenditure function? 4. 5. What is the value of income-expenditure equilibrium GDP, (Y*)? 6. Explain in economic terms what happens when not in the income-expenditure equilibrium? Both when GDP > AE planned and GDP < AE planned. For each situation what needs to happen to move the economy toward equilibrium?.
Table 11-6 Government Real GDP Consumption Investment Purchases 1 Net Exports $1,000 $1,000 $100 $150 -$50 2 3 2,000 1,900 100 150 -50 3,000 2,800 100 150 -50 4 4,000 3,700 100 150 -50 Using the table above, answer the following question. The numbers in the table are in billions of dollars. 13) Refer to Table 11-6. What is the value of MPC? A) 0.2 B) 0.5 C) 0.75 D0.9 E) None of the above