1.2. In the table below is data for a hypothetical private-closed economy. Table 1 A Private Closed Economy Real domestic output (GDP=DI) (billions) Consumption (billions) Saving (billions) Investment (billions) Aggregate Expenditures (billions) $240 260 280 300 320 340 360 380 400 $244 260 276 292 308 324 340 356 372 $ -4 0 4 8 12 16 20 24 28 $16 16 16 16 16 16 16 16 16 $260 276 292 308 324 340 356 372 388 Recall, private means that there is no government and closed means that there is no foreign trade. Use the information in the Table 1 to analyze aggregate expenditures (AE) model below (Figure 1. Equilibrium in a Private Closed Economy). Figure 1. Equilibrium in a Private Closed Economy 1.3. Identify the mistake and explain why the graph of the aggregate expenditures line does not correctly illustrate the economy's equilibrium. (See attached picture)
1.2. In the table below is data for a hypothetical private-closed economy.
Table 1 A Private Closed Economy
|
Real domestic output ( (billions) |
Consumption (billions) |
Saving (billions) |
Investment (billions) |
Aggregate Expenditures (billions) |
|
|
|
|
|
|
|
$240 260 280 300 320 340 360 380 400 |
$244 260 276 292 308 324 340 356 372 |
$ -4 0 4 8 12 16 20 24 28 |
$16 16 16 16 16 16 16 16 16 |
$260 276 292 308 324 340 356 372 388 |
|
|
|
|
|
|
Recall, private means that there is no government and closed means that there is no foreign trade.
Use the information in the Table 1 to analyze aggregate expenditures (AE) model below (Figure 1. Equilibrium in a Private Closed Economy).
Figure 1. Equilibrium in a Private Closed Economy
1.3. Identify the mistake and explain why the graph of the aggregate expenditures line does not correctly illustrate the economy's equilibrium. (See attached picture)
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