Explanation Table -1 shows the consumption schedule. Table -1 Possible level of employment (in Millions) Real domestic output GDP = DI (In Billions) Consumption (In Billion) 40 $240 $244 45 260 260 50 280 276 55 300 292 60 320 308 65 340 324 70 360 340 75 380 356 80 400 372 Savings can be calculated by using the following formula: Saving = GDP − Cosnumtpiton (1) Substitute the respective values in equation (1) to calculate the savings level at GDP $240. Saving = 240 − 244 = − 4 Saving is -$4 billion. Aggregate expenditure (AE) can be calculated by using the following formula: AE = Consumption + Investment (2) Substitute the respective values in Equation (2) to calculate the aggregate expenditure at GDP level $240. AE = 244 + 16 = 260 Aggregate expenditure is $260. Table -2 shows the savings level at different levels of GDP in billions and aggregate expenditure that are obtained by using Equation (1) and (2)

Savings and Investment.

MACROECONOMICS W/CONNECT

18th Edition

ISBN: 9781307253092

Author: McConnell

Publisher: Mcgraw-Hill/Create

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