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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