Following are some facts about nation J for 2005: Consumption of goods produced
ID: 1248096 • Letter: F
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 billionC= $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.