Assignment 2

Real GDP C I G NX
Y
800 7,300 1000 1000 -500
9000 7.900 1000 1000 -500
10,000 8,500 1000 1000 -500
11,000 9,100 1000 1000 -500
12.000 9,700 1000 1000 -500

1- Use the information in the following table to answer the following questions.
a. What is the equilibrium level of real GDP? Y=AE=10,000
b. What is the MPC and MPS? MPC= C/ Y=8,5000-7,900/10,000-9,000=0,6
MPS= S/ Y=1,500-1,100/10,000-9,000=0,4
c. Suppose net exports increase by US$200 billion.

What will be the new equilibrium level of real GDP? Use the multiplier formula to
determine your answer. Multi=1/1-MPC=1/1-0,6=2.5

New EB=old EB=+(multi X 200)=10,000+(2.5 X 200)=10,500

2- Suppose a booming economy in Europe causes net exports to rise by US$ 75
billion in Saudi Arabia. If the MPC is 0.8. What will be the change in equilibrium
GDP? Multi=1/1-MPC=1/1-0,8=5

(multi X 75)= 5 x 75=375

3-What is the value of autonomous expenditure in the following macroeconomic
model?
C = 2,000 + 0.75Y Consumption function
I = 400 Investment function Y=C+I+G+NX
G = 700 Government spending function
NX = –100 Net export function
2,000+900+700-100
Y = C + I + G + NX Equilibrium condition
=3,000