Using Table 28.4, which shows the addition of a $20 billion government purchase to the private open economy, what is the new equilibrium GDP?
Explanation
Government purchases are a component of aggregate expenditures. Adding government purchases to the model shifts the aggregate expenditures schedule upward, resulting in a higher equilibrium level of real GDP.
Other questions
What is the most fundamental assumption underpinning the aggregate expenditures model as developed by Keynes?
In a private closed economy, if real domestic output (GDP) is $410 billion, consumption is $405 billion, and planned investment is $20 billion, what is the resulting unplanned change in inventories?
In the graphical representation of the aggregate expenditures model, what does the 45-degree line represent?
What is the relationship between leakages and injections at the equilibrium level of GDP in a private closed economy?
If an initial $5 billion increase in investment spending leads to a $20 billion increase in GDP, what is the value of the multiplier?
How do positive net exports affect the aggregate expenditures schedule and the equilibrium level of GDP?
In the complete aggregate expenditures model for an open economy with a public sector, what condition defines equilibrium GDP?
What is a recessionary expenditure gap?
According to the Keynesian analysis presented in the aggregate expenditures model, what is a primary policy solution to close a recessionary expenditure gap of $5 billion in an economy with a multiplier of 4?
What is an inflationary expenditure gap?
In a private closed economy with an equilibrium GDP of $470 billion, if firms increase their investment spending by $5 billion, and the multiplier is 4, what will be the new equilibrium GDP?
According to Table 28.2, what is the equilibrium level of GDP in the private closed economy shown?
What is the primary reason the aggregate expenditures model was developed by John Maynard Keynes?
Why must imports be subtracted from total spending when calculating aggregate expenditures on domestic goods and services?
If a government imposes a lump-sum tax of $20 billion, and the MPC is 0.75, by how much will the consumption schedule initially shift downward?
What is the relationship between actual investment and saving in a private closed economy, regardless of the level of GDP?
Why do equal-sized increases in government spending (G) and taxes (T) have different impacts on equilibrium GDP in the aggregate expenditures model?
In the open mixed economy model, what constitutes the leakages from the income-expenditures stream?
Consider the hypothetical economy in Table 28.5. If the full-employment level of GDP is $510 billion, what is the situation at the equilibrium GDP of $490 billion?