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

question 7

Essay

Suppose initially that C = 800, I = 300, G = 200, and X = -100.
(A) What is GDP?
(B) Calculate the faur shares of GDP
(C) Suppose Gincreases to 300 and GDP increases to 1,500. What is the new gavernent spenting share? Draw a diagran to jllustrate what happens to the equilibriun interest rate.
(D) Without doing any calculations, exgalain what happens to each of the three nongavernment shares of GDP after the government spenfing and GDP increase in (C)
(E) Suppose instead that Gincreases to 300 and GDP increases to 2,000. What is the new covernment spending share? Draw a diagram to ilustrate what happens to the ectuilibrium interest rate.
(F) Without daing any calculations, explain what happens to each of the three nongoverment shares of GDP after the goverment spending and GDP increase in (E).

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Definitions:

Adipose Tissue

A type of connective tissue that stores fat, providing insulation and energy reserves.

Connective Tissue

A type of body tissue that supports, binds together, and protects organs and other tissues, comprising cells, fibers, and a ground substance.

Oily Substance

A greasy or slick material, often derived from petroleum or plant sources, that does not mix with water.

Parasitic Lice

refer to tiny, wingless insects that live on the skin of humans or animals, feeding on blood and causing irritation.