Consider a closed economy without government. Since the economy is closed, X = 0 and IM=0....

 

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Consider a closed economy without government. Since the economy is closed, X = 0 and IM=0. Because there is no government in this economy, G = 0, T = 0 and TR = 0. In such an economy, we have GDP =C+I YD = GDP The following table shows the data on GDP, disposable income (YD), consumption (C), planned investment (Iplanned), where it is assumed that I planned = $500 You want to find the equilibrium level of GDP in this economy. Iplanned AEplanned Unplanned GDP YD с $0 $0 $1000 $500 $1000 $1000 $1500 $500 $2000 $2000 $2000 $500 $3000 $3000 $2500 $500 $4000 $4000 $3000 $500 $5000 $5000 $3500 $500 1. Recall that aggregate planned spending (AEplanned) is defined as AEplanned = C + Iplanned Using this definition, complete the column for AE planned. 2. Find the level of equilibrium GDP. Recall that equilibrium is achieved when GDP equals AEplanned. 3. Complete the column for lunplanned. 4. What is the level of lunplanned when the economy is in equilibrium? 5. Is the value of lunplanned positive or negative if GDP < AEplanned? 6. Is the value of lunplanned positive or negative if GDP> AEplanned? Consider a closed economy without government. Since the economy is closed, X = 0 and IM=0. Because there is no government in this economy, G = 0, T = 0 and TR = 0. In such an economy, we have GDP =C+I YD = GDP The following table shows the data on GDP, disposable income (YD), consumption (C), planned investment (Iplanned), where it is assumed that I planned = $500 You want to find the equilibrium level of GDP in this economy. Iplanned AEplanned Unplanned GDP YD с $0 $0 $1000 $500 $1000 $1000 $1500 $500 $2000 $2000 $2000 $500 $3000 $3000 $2500 $500 $4000 $4000 $3000 $500 $5000 $5000 $3500 $500 1. Recall that aggregate planned spending (AEplanned) is defined as AEplanned = C + Iplanned Using this definition, complete the column for AE planned. 2. Find the level of equilibrium GDP. Recall that equilibrium is achieved when GDP equals AEplanned. 3. Complete the column for lunplanned. 4. What is the level of lunplanned when the economy is in equilibrium? 5. Is the value of lunplanned positive or negative if GDP < AEplanned? 6. Is the value of lunplanned positive or negative if GDP> AEplanned?