Discuss which of the following fall into the categories of consumption, investment, government expenditure and net exports from the Y = C + I + G + NX (X – M) identity, and whether the impact is to increase or decrease GDP. (a) Charles buys a second-hand textbook from Tim. (b) When Charles bought the book, he paid Sarah $10 to collect it from Tim. (c) Thomas buys a new house (d) Your firm sells meat to Indonesia (e) The fish and chips shop down the road buys fish to make meals for diners. (f) The same shop buys a deep fryer to fry fish for meals.

2. Saving and investment in the national income accounts The following table contains data for a hypothetical closed economy that uses the dollar as its currency.  Suppose GDP in this country is $1,800 million. Enter the amount for government purchases. National Income Account Value (Millions of dollars) Government Purchases (G�)   Taxes minus Transfer Payments (T�) 585 Consumption (C�) 675 Investment (I�) 675   Complete the following table by using national income accounting identities to calculate national saving. In your calculations, use data from the preceding table. National Saving (S)National Saving (�)  =  =  G - TG - T       =  =  I�          million    Complete the following table by using national income accounting identities to calculate private and public saving. In your calculations, use data from the initial table. Private SavingPrivate Saving  =  =          =  =    million    Public SavingPublic…

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(a) Consider a closed economy whose desired savings (Sd) and desired investment (Id) are given by the following expressions: CC₂ rd where r denotes the real interest rate. Find the equilibrium in the Goods market for this economy, and represent it in a graph. From now on, suppose there are two large Countries in the world, say Canada (Ca) and the United States (US). Ca (b) To start with, assume that both Countries are closed economies. Their desired consumption (Cd) and desired investment (I) are given by: Cus Its Sd Id = = = = 100+ 600r 170 - 400r 10+ cca (Yca Tca) - 100r 15 - 100r 40+ cus (Yus - Tus) - 200r = 230 - 200r Moreover, output (Y), taxes (T), public expenditure (G), and the marginal propensity to consume (c) are as follows: