A. The accompanying table shows gross domestic income product (GDP), disposable income (YD), consumer spending (C), and planned investment spending (I manned) in an economy. Assume there is no government or foreign sector in this economy. Complete the table by calculating planned aggregate spending (AEpoet) and unplanned inventory investment (I unplanned). (10 points)(show work and ANSWER ALL PARTS) GDP YO C Iplanned AE planned I Unplanned (billions of dollars) $0 $0 $100 $300 400 400 400 300 800 800 700 300 1,200 1,200 1,000 300 1,600 1,600 1,300 300 2,000 2,000 1,600 300 2,400 2,400 1,900 300 2,800 2,800 2,200 300 3,200 3,200 2,500 300 B. What is the aggregate consumption function? (10 points) C. What is Y*, income-expenditure equilibrium GDP? Explain why. (10 points) D. What is the value of the multiplier? (5 points) E. If planned investment spending falls to $200 billion, what will be the new Y*? (10 points) F. If autonomous consumer spending rises to $200 billion, what will be the new Y* 7(10 points Note: Show all of your work including calculations. Unit 11: The Effect of a Change in Spending on GDP Assuming that the aggregate price level is constant, the interest rate is fixed, and there are no taxes and no foreign trade, what will be the change in GDP if the following events occur? A. There is an autonomous increase in consumer spending of $25 billion; the marginal propensity to consume is 2/3. (5 points) B. Firms reduce investment spending by $40 billion; the marginal propensity to con- sume is 0.8. (5 points) C. The government increases its purchases of military equipment by $60 billion; the marginal propensity to consume is 0.6. (5 points)

Last year, a small nation with abundant forests cut down 200 worth of trees. It then turned 100 worth of trees into 150 worth of lumber. It used 100 worth of that lumber to produce $250 worth of bookshelves. Assuming the country produces no other outputs, and there are no other inputs used in producing trees, lumber, and bookshelves, what is this nations GDP? In other words, what is the value of the final goods the nation produced including trees, lumber and bookshelves?

What are the main components of measuring GDP with what is produced?

What are the two main difficulties that arise in comparing different comparing GDP?