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GDP and Net exports

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Answer the following questions based on the following information: Please provide a step by step explanation.

See table with data:

a. i. Compute the GDP
ii. Compute the net exports

b. Assume the government cuts its purchases by $120 billion. As a result, the budget deficit is reduced by $40 billion, private domestic saving decreases by $10 billion, disposable personal income decreases by $80 billion and the trade deficit is reduced by $15 billion. By how much has national income (Y) changed?

c. Suppose that the economy starts at equilibrium and the MPC = 0.75. What would be the effect of a $300 increase in government spending once all the rounds of the multiplier process are complete?
d. Suppose that the economy starts at equilibrium and the MPC = 0.8. What would be the effect of a 300 increase in taxes once all the rounds of the multiplier process are complete?

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The compute GDP and Net exports in the case.

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Jayant Kumar, MBA
Education
  • MBA, Indian Institute of Finance
  • Bsc, Madras University
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