Suppose Initially That C = 800,I = 300,G = 200,and

question 108

Essay

Suppose initially that C = 800,I = 300,G = 200,and X = -100.
(A)What is GDP?
(B)Calculate the four shares of GDP.
(C)Suppose G increases to 300 and GDP increases to 1,500.What is the new government spending share? Draw a diagram to illustrate what happens to the equilibrium interest rate.
(D)Without doing any calculations,explain what happens to each of the three nongovernment shares of GDP after the government spending and GDP increase in (C).
(E)Suppose instead that G increases to 300 and GDP increases to 2,000.What is the new government spending share? Draw a diagram to illustrate what happens to the equilibrium interest rate.
(F)Without doing any calculations,explain what happens to each of the three nongovernment shares of GDP after the government spending and GDP increase in (E).

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Definitions:

Mean Value

The average of a set of numbers, found by dividing the sum of all values by the number of values.

Statistical Thinking

An approach to understanding, interpreting, and communicating data through the use of statistical methods and reasoning.

Interconnected Processes

Processes that are linked with one another such that the output of one process becomes the input for another, creating a complex system where the processes depend on each other.

Statistics

The science of collecting, analyzing, interpreting, and presenting data to make informed decisions.