Answered: a) The accompanying table shows gross…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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a) The accompanying table shows gross domestic product (GDP), disposable income (YD), consumer spending (C), and planned investment spending (I-planned) in an economy. Assume there is no government or foreign sector in this economy. Complete the table by calculating planned aggregate spending (AE-planned) and unplanned inventory investment (I-unplanned)

b) What is the aggregate consumption function?

c) What is Y*, income-expenditure equilibrium GDP?

d) What is the value of the multiplier?

e) If planned investment spending falls to $200 billion, what will be the new Y*?

f) If autonomous consumer spending rises to $200 billion, what will be the new Y*?

GDP
YD
Ipianned
AEPlanned lunplanned
(billions of dollars)
$0
$0
$100
$300
?
400
400
400
300
?
?
800
800
700
300
?
?
1,200
1,200
1,000
300
?
1,600
1,600
1,300
300
?
?
2,000
2,000
1,600
300
?
?
2,400
2,400
1,900
300
?
?
2,800
2,800
2,200
300
?
?
3,200
3,200
2,500
300
?

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