Assume the following data for a hypothetical economy:

The total consumption expenditure (C) is 1000.
The investment expenditure (I) is 500.
The government expenditure (G) is 700.
The net export (NX) is -200.
The real interest rate (r) is 5%.
a) Calculate the following:

i. Gross Domestic Product (GDP)
ii. National income (Y)
iii. Disposable income (DI)

b) If the government increases its expenditure by 100, what will be the new values of GDP, Y, and DI?

c) If the economy's real interest rate increases to 7%, what will be the new values of GDP, Y, and DI?

d) Calculate the marginal propensity to save (MPS) for the economy, assuming that the marginal propensity to consume (MPC) is 0.75.

e) If the economy's exports increase by 50, what will be the new value of GDP?

Show all your calculations and round your answers to two decimal places.

Answer rating: 100% (QA)

The detailed answer for the above question is provided below a i GDP C I G NX 1000 500 700 ... View the full answer