Use the national income data in the table below, compute (a) GDP, (b) NDP,
and (c) NI using the expenditure approach.
National Income Accounting
U.S. Exports of goods and
Consumption of fixed
Taxes on production and
Net private domestic
U.S. imports of goods and
Net foreign factor income
Compare a $100,000 median family income in 1980 to the same income in
1990, 2000, and 2010. What are the differences in the available products?
What are the differences in the quality of those products? Considering this, in
which of those years would you rather live? Why?
Assume that the consumption schedule for a private open economy is such
that consumption C = 20 + 0.80Y. Assume further that planned investment Ig
and net exports Xn are independent of the level of real GDP and constant at
Ig = 40, G =20 and Xn = 10. Recall also that, in equilibrium, the real output
produced (Y) is equal to aggregate expenditures: Y = C + Ig + G+ Xn.
a. Calculate the equilibrium level of income or real GDP for this
b. What happens to equilibrium Y if G changes to 20? What does
this outcome reveal about the size of the multiplier? What does
this outcome reveal about the impact of fiscal policy?
Using the hypothetical economy data in the table below, calculate the
aggregate demand and supply, as well as its price level.
Then address the following:
a) What is the equilibrium price level and the equilibrium level of
real output in this hypothetical economy? Use Excel to graph
both the aggregate demand and aggregate supply curves. Can
there be equilibrium level of output at below full employment?
b) At what price level will aggregate supply equal aggregate
demand? At what price level will demand fall below aggregate
supply? If given a price level of 300, will aggregate demand
c) If the aggregate demand schedule shifted by $20 billion to the
right at every level, what would be the new equilibrium level of