Following are some facts about nation J for 2005: Consumption of goods produced

Question

Following are some facts about nation J for 2005:

Consumption of goods produced in nation J: $100 billion
Consumption of imported goods: $20 billion

Purchases of capital produced in nation J: $80 billion
Purchases of imported capital: $5 billion

Desired change in inventories: $Zero
Undesired change in inventories: $5 billion

Purchases of government goods produced in nation J: $50 billion
Purchases of imported government goods: $2 billion

Exports of goods produced in nation J: $30 billion

Use this information to answer the following questions about nation J for 2005.

1.) Calculate C, I and G:
2.) Calculate M (total imports)
3.) Calculate GDP:
4.) Calculate total injections:
5) Calculate total desired injections:

Explanation / Answer

1.) Calculate C, I and G: C is the total consumption by households = $100 billion + $20 billion
C= $120 b
I, is the total investment = $80 billion + 5 billions I= $85 billions
G, is the total government spending= $50 billion + $2 billions G= $52 billions
2.) Calculate M (total imports) M= Consumption of imported goods,$20 billion + Purchases of imported capital, $5 billion +Purchases of imported government goods,$2 billion


that implies, M= 20 + 5 + 2                       = $27 billions Exports, X= $30 billion 3.) Calculate GDP:
GDP= C + I + G + X -M       = 120 + 85 + 52 + 30- 27            = $260 billions. 4.) Calculate total injections: Total Injections= I+G +X                        = 85+ 52 + 30                        = $167 billions Total Injections= $167 billions 5) Calculate total desired injections: A balaced economy in equillibrium should have, Total Injections =total Leakages I+G +X =Savings+ Tax + imports If Total Injections greater than total Leakages, than economy will be in boom, and a demand pull inflation occurs. If Total Injections less than total Leakages, than recession occurs. So a balanced economy is desirable. Difference between injections and leakages Total Injections= I+G +X Leakages= Savings+ Tax + imports here tax is not given Savings= Invesment + Undesired change in inventories, $5 billion                     = 85+5            =$90 billions So, Leakages= Savings + imports
              = 90+ 27               = $117 total desired injections= 167 + 117                                                                     = $50 billions $50 billions is the difference, and we can either increase taxes by $ 50 or reduce governemt spendging to make an equillibrium. Total Injections= $167 billions 5) Calculate total desired injections: A balaced economy in equillibrium should have, Total Injections =total Leakages I+G +X =Savings+ Tax + imports If Total Injections greater than total Leakages, than economy will be in boom, and a demand pull inflation occurs. If Total Injections less than total Leakages, than recession occurs. So a balanced economy is desirable. Difference between injections and leakages Total Injections= I+G +X Leakages= Savings+ Tax + imports here tax is not given Savings= Invesment + Undesired change in inventories, $5 billion                     = 85+5            =$90 billions So, Leakages= Savings + imports
              = 90+ 27               = $117 total desired injections= 167 + 117                                                                     = $50 billions $50 billions is the difference, and we can either increase taxes by $ 50 or reduce governemt spendging to make an equillibrium. Total Injections= I+G +X Leakages= Savings+ Tax + imports here tax is not given Savings= Invesment + Undesired change in inventories, $5 billion                     = 85+5            =$90 billions So, Leakages= Savings + imports
              = 90+ 27               = $117 total desired injections= 167 + 117                                                                     = $50 billions $50 billions is the difference, and we can either increase taxes by $ 50 or reduce governemt spendging to make an equillibrium. Leakages= Savings + imports
              = 90+ 27 Leakages= Savings + imports               = $117 total desired injections= 167 + 117                                                                     = $50 billions $50 billions is the difference, and we can either increase taxes by $ 50 or reduce governemt spendging to make an equillibrium.

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