AE = 2,000 + ½ Y a) Each row of the table below provides a combination of real GDP and aggregate expenditure that lies on the aggregate expenditure line. Using the information provided above, complete the table below. Real GDP (Y) Aggregate Expenditure (AE) $2.000 $0 $1,000 $2,000 $3,000 $4,000 $5.000 $3,000 $4,000 b) At what level of real GDP is this economy in macroeconomic equilibrium? c) Suppose that real GDP is currently $1,000. What is the value of aggregate expenditure? d) Suppose that real GDP is currently $1,000. Is real GDP greater than or less than aggregate expenditure? By how much? e) Suppose that real GDP is currently $1,000. What does your answer to Part D say about whether there is an unexpected increase or decrease in inventories. How big is this unexpected change? f) Suppose that real GDP is currently $5,000. What is the value of aggregate expenditure? g) Suppose that real GDP is currently $5,000. Is real GDP greater than or less than aggregate expenditure? By how much? h) Suppose that real GDP is currently $5,000. What does your answer to Part G say about whether there is an unexpected increase or decrease in inventories. How big is this unexpected change?

AE = 2,000 + ½ Y a) Each row of the table below provides a combination of real GDP and aggregate expenditure that lies on the aggregate expenditure line. Using the information provided above, complete the table below. Real GDP (Y) Aggregate Expenditure (AE) $2.000 $0 $1,000 $2,000 $3,000 $4,000 $5.000 $3,000 $4,000 b) At what level of real GDP is this economy in macroeconomic equilibrium? c) Suppose that real GDP is currently $1,000. What is the value of aggregate expenditure? d) Suppose that real GDP is currently $1,000. Is real GDP greater than or less than aggregate expenditure? By how much? e) Suppose that real GDP is currently $1,000. What does your answer to Part D say about whether there is an unexpected increase or decrease in inventories. How big is this unexpected change? f) Suppose that real GDP is currently $5,000. What is the value of aggregate expenditure? g) Suppose that real GDP is currently $5,000. Is real GDP greater than or less than aggregate expenditure? By how much? h) Suppose that real GDP is currently $5,000. What does your answer to Part G say about whether there is an unexpected increase or decrease in inventories. How big is this unexpected change?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Concept explainers

Equilibrium Price and Quantity

Equilibrium refers to a state of balance that comes about because there is equality in all forces.

Question

How can I answer these questions (A-H) by using the equation given?

1. Below, you are provided with an equation for the aggregate expenditure line. You will use
this aggregate expenditure line to identify a macroeconomic equilibrium. You will also
examine the relationship between aggregate expenditure, real GDP, the changing quantity
of inventories.
The aggregate expenditure line is:
AE = 2,000 + 2 Y
a) Each row of the table below provides a combination of real GDP and aggregate
expenditure that lies on the aggregate expenditure line. Using the information provided
above, complete the table below.
Aggregate
Expenditure (AE)
2.000
Real GDP (Y)
$1,000
$2,000
$3,000
$4,000
$45,000
$3,000
$4,000
b) At what level of real GDP is this economy in macroeconomic equilibrium?
c) Suppose that real GDP is currently $1,000. What is the value of aggregate expenditure?
d) Suppose that real GDP is currently $1,000 Is real GDP greater than or less than aggregate
expenditure? By how much?
e) Suppose that real GDP is currently $1,000. What does your answer to Part D say about
whether there is an unexpected increase or decrease in inventories. How big is this
unexpected change?
) Suppose that real GDP is currently $5,000. What is the value of aggregate expenditure?
g) Suppose that real GDP is currently $5.000. Is real GDP greater than or less than aggregate
expenditure? By how much?
h) Suppose that real GDP is currently $5.000. What does your answer to Part G say about
whether there is an unexpected increase or decrease in inventories. How big is this
unexpected change?

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