B. Does or does not & there exists or there does not exist C. Does or does not &
ID: 1194398 • Letter: B
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B. Does or does not & there exists or there does not exist C. Does or does not & there exists or there does not exist 1 pt This Testi 50 pts 57 of 60 complete Use the data on real GDP in the following table to answer the questions. Country Brazil 2009 2010 2011 2012 1,034 $1,112 $1,142 $1,152 Mexico8,378 8,823 9,168 9,530 Thaiand4.263 49 4,6004,896 Note: All values are in billions of domestic curency st censtant prices Seuree: Intersational Menctary Fund, World Ohutlook Databare, Aprll 2013 The country that experienced the highest rate ofe megrowth during 2010 is with a growth rate of%. (Enter your response as a percentage rounded to fwo decimal places, growth rate of with % (Entry rre r 'aprontag, ondVtor odendplei The country that expe enced the h ghest average annual gr wd rounded to fwo decimal places ate between 2010 and 2012 s - with an average annual growth rate of% (Enter your response as a percentage Since each country's real GDP is measured in a different currency, befoee one can compare the real GDPs of different countries, it is necessary to use OA the open market operation (OMO) for international price level. OB the purchasing power parities (PPPs) as a currency converter. Oc. the producer price index (PPT) for a uniform price level OD the consamer price index (PPT) for a constant price level. Click to select your answerts) Previous Question Next QuestionExplanation / Answer
Q2.
Y
(in billion $)
C
(in billion $)
I
(in billion $)
G
(in billion $)
NX
(in billion $)
AD
(C+I+G+NX)
(in billion $)
$10,000
$5,500
$2,000
$4,000
-$500
$11,000
11,000
6,000
2,000
4,000
-500
11,500
12,000
6,500
2,000
4,000
-500
12,000
13,000
7,000
2,000
4,000
-500
12,500
14,000
7,500
2,000
4,000
-500
13,000
Equilibrium level of GDP is that level of GDP at which real GDP (Y) is equal to AD.
As above table show, when real GDP (Y) is $12,000, it equals AD.
So, the equilibrium level of GDP is $12,000 billion.
MPC = Change in consumption/Change in real GDP or Y
As above table show, real GDP or Y is increasing at constant rate of $1,000 billion.
So, change in real GDP is $1,000 billion.
Consumption is increasing at constant rate of $500 billion.
So, change in consumption is $500 billion.
MPC = Change in consumption/Change in real GDP or Y
MPC = $500 billion/$1,000 billion
MPC = 0.50
Thus, the MPC is 0.50.
Calculate Value of Multiplier –
Multiplier = 1/(1-MPC) = 1/(1-0.50) = 2
Net exports increase by $400 billion.
Increase in spending = Increase in net exports * Multiplier
= $400 billion * 2
= $800 billion
New level of GDP = Equilibrium GDP + Increase in spending
= $12,000 billion + $800 billion
= $12,800 billion
Thus, a $400 billion increase in net exports leads to change in spending of $800 billion, so the new level of GDP will be $12,800 billion.
Y
(in billion $)
C
(in billion $)
I
(in billion $)
G
(in billion $)
NX
(in billion $)
AD
(C+I+G+NX)
(in billion $)
$10,000
$5,500
$2,000
$4,000
-$500
$11,000
11,000
6,000
2,000
4,000
-500
11,500
12,000
6,500
2,000
4,000
-500
12,000
13,000
7,000
2,000
4,000
-500
12,500
14,000
7,500
2,000
4,000
-500
13,000
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