this is a table with some questions and i don't know how to solve it

(1)real domestic output (GDP=DI) in billions
$200
$250
$300
$350
$400
$450
$500
$550
(2)aggregate expenditures private closed economy billions
$240
$280
$320
$360
$400
$440
$480
$520
(3)exports billions
$20
$20
$20
$20
$20
$20
$20
$20
(4)imports billions
$30
$30
$30
$30
$30
$30
$30
$30
(5)net exports private economy
??
??
??
??
??
??
??
??
(6)aggregate expenditures open,billions
??
??
??
??
??
??
??
??
??
the 1 question is use columns 1and 2 to determine the equilibrium GDP for this hypothetical economy.
2.fill in columns 5 and 6 to dtermine the equilibrium GDP for the open economy.
3. Given the original $20 billion level of exports, what would be the equilibrium GDP if imports were $10 billion greter at each level of GDP?
4. What is the multiplier in this example?

I am confused with your tables. I hope I am interpreting them correctly

I presume your first bank of numbers, labled GDP=DI are various possible levels of total output. In this example GDP=DI. Your second bank of number are levels of aggregate spending (Consumption) associated with each of these levels of disposable income. So, at 200 GDP, consumption is 240 -- meaning dis-savings is -40.

I presume there are no desired investments in this example. So, equilibrium occurs when Consumption = disposable income. $400
Note that when income rises by $50, consumption rises by 40. This means the MPC=40/50 = .8, which means MPS=.2. The multiplier is 1/mps = 1/.2 = 5.0

Now layer in the fact you have $10 net imports (-10 net exports). Using the multiplier, GDP should fall by 5*10 = $50

Explain Bot Explain Bot answered
9 months ago

To determine the equilibrium GDP for the hypothetical closed economy, you need to compare the real domestic output (GDP=DI) in column 1 with the aggregate expenditures in column 2 and find the point where they are equal. In this case, the equilibrium GDP can be determined by finding the level of GDP where aggregate expenditures equal GDP.

Looking at the table, you can see that at $400 billion of GDP, the aggregate expenditure is also $400 billion. Therefore, the equilibrium GDP for the closed economy is $400 billion. This means that at this level, total spending and total output are in balance.

To fill in columns 5 and 6 to determine the equilibrium GDP for the open economy, you need to consider net exports (exports minus imports). Column 3 represents exports, and column 4 represents imports. By subtracting imports from exports, you can calculate net exports (exports minus imports), which gives you column 5.

For example, at $200 billion of GDP, exports are $20 billion and imports are $30 billion. Therefore, net exports at this level of GDP are $20 billion minus $30 billion, which equals -$10 billion.

To determine column 6, you need to consider the effect of net exports on aggregate expenditures. Since net exports represent a leakage from the circular flow of income, a decrease in net exports will decrease aggregate expenditures. In this case, you can use the multiplier concept to calculate the change in equilibrium GDP.

The multiplier in this example is given as 5.0, which means that a change in aggregate expenditures will have a five times larger effect on GDP.

To answer the third question, if imports were $10 billion greater at each level of GDP, you would subtract $10 billion from the net exports in column 5. This would result in a decrease in aggregate expenditures and a corresponding decrease in equilibrium GDP.

To determine the multiplier in this example, you can calculate it using the marginal propensity to consume (MPC) and the marginal propensity to save (MPS). MPC is the proportion of additional income that is consumed, while MPS is the proportion of additional income that is saved.

In the table, you can see that when income rises by $50 billion, consumption rises by $40 billion. Therefore, the MPC is 40/50 = 0.8. The MPS is the complement of the MPC, so MPS = 1 - 0.8 = 0.2. The multiplier is calculated as 1/MPS, which is equal to 1/0.2 = 5.0.

I hope this helps clarify how to solve the table and answer the questions.