The following table shows some information on a hypothetical economy. The table lists real GDP, consumption (C), investment (I), government spending (G), net exports (X-M), and aggregate expenditures (AE). In this problem, assume that investment, government spending, and net exports are independent of the economy's real GDP level. Real GDP $400 $500 $600 $700 $ True $ O False с $225 $385 $545 X- I G M $100 $120 -$5 $100 $120 -$5 $100 $120 -$5 $100 $120 -$5 $100 $120 -$5 $ AE $520 $680 $760 Unplanned Inventory Investment -$40 -$20 $0 $20 $40 Using the numbers provided in the table, enter the correct numbers in the empty cells. Then, using the dropdown selection menus in the right-most column, indicate whether output will tend to increase, decrease, or remain in equilibrium at each level of real GDP in the table. (Note: The table uses negative numbers to indicate an unplanned inventory investment depletion and positive numbers to indicate an unplanned inventory investment accumulation.) True or False: The most fundamental assumption behind the aggregate expenditures model is that prices in the economy are flexible. Direction of Real GDP and Employment When aggregate expenditures are less than real GDP, there is an unplanned inventory investment employment and production. . This will prompt firms to
The following table shows some information on a hypothetical economy. The table lists real GDP, consumption (C), investment (I), government spending (G), net exports (X-M), and aggregate expenditures (AE). In this problem, assume that investment, government spending, and net exports are independent of the economy's real GDP level. Real GDP $400 $500 $600 $700 $ True $ O False с $225 $385 $545 X- I G M $100 $120 -$5 $100 $120 -$5 $100 $120 -$5 $100 $120 -$5 $100 $120 -$5 $ AE $520 $680 $760 Unplanned Inventory Investment -$40 -$20 $0 $20 $40 Using the numbers provided in the table, enter the correct numbers in the empty cells. Then, using the dropdown selection menus in the right-most column, indicate whether output will tend to increase, decrease, or remain in equilibrium at each level of real GDP in the table. (Note: The table uses negative numbers to indicate an unplanned inventory investment depletion and positive numbers to indicate an unplanned inventory investment accumulation.) True or False: The most fundamental assumption behind the aggregate expenditures model is that prices in the economy are flexible. Direction of Real GDP and Employment When aggregate expenditures are less than real GDP, there is an unplanned inventory investment employment and production. . This will prompt firms to
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:2. A tabular approach to Keynesian equilibrium
The following table shows some information on a hypothetical economy. The table lists real GDP, consumption (C), investment (I), government
spending (G), net exports (X-M), and aggregate expenditures (AE). In this problem, assume that investment, government spending, and net exports
are independent of the economy's real GDP level.
Real GDP
$400
$500
$600
$700
$
True
$
O False
с
$225
$385
$545
X-
I
G
M
$100
$120 -$5
$100 $120 -$5
$100 $120 -$5
$100 $120 -$5
$100
$120 -$5
$
AE
$520
$680
$760
Unplanned Inventory
Investment
-$40
-$20
$0
$20
$40
Using the numbers provided in the table, enter the correct numbers in the empty cells. Then, using the dropdown selection menus in the right-most
column, indicate whether output will tend to increase, decrease, or remain in equilibrium at each level of real GDP in the table. (Note: The table uses
negative numbers to indicate an unplanned inventory investment depletion and positive numbers to indicate an unplanned inventory investment
accumulation.)
True or False: The most fundamental assumption behind the aggregate expenditures model is that prices in the economy are flexible.
Direction of Real GDP and
Employment
When aggregate expenditures are less than real GDP, there is an unplanned inventory investment
employment and production.
This will prompt firms to
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