--%>

Equilibrium GDP for the open economy

The data of columns 1 and 2 of the given table are for private closed economy. Open up this economy to international trade through including the export & import figures of columns 3 and 4.  Fill  up in columns 5 and 6 to find out the equilibrium GDP for the open economy. Describe why this equilibrium GDP varies from that of the closed economy.

365_Private closed economy.png

E

Expert

Verified

Net export data for column 5 (top to bottom); $-10 billion in every space. Aggregate expenditure data for column 6 (top to bottom): $230; $270; $310; $350; $390; $430; $470; $510. For the open economy equilibrium GDP is $350 billion, $50 billion below the $400 billion equilibrium GDP for the closed economy. The $-10 billion of overall exports is a leakage which reduces equilibrium GDP by $50 billion. 

   Related Questions in Finance Basics

  • Q : Describe the three financial factors

    Normal 0 false false

  • Q : Explain regulations Regulations: It is

    Regulations: It is a rule, order, or standard of common application issued by a state agency to interpret, implement, or make specific law enforced or managed by it, or to govern its measures. With state government, the procedure of adopting or modify

  • Q : Negative consequences of company

    Explain negative consequences of a company holding too much cash? A company holding too much cash would be giving up the chance to invest more in income generating assets

  • Q : What is the cost of equity Intermediate

    Intermediate Finance   Always leave 4 decimals in the ($) numbers in your calculations (e.g. PMT = $10.8924) and, particularly, 6 decimals for interest rates (e.g. r = 0.078643 or 7.8643%). QUESTION 1:?Conlins Manufactu

  • Q : Describe working capital Describe

    Describe working capital? Working capital contains the current assets of the firm.

  • Q : Explain marginal cost of capital

    Explain marginal cost of capital schedule (MCC)? Is the schedule always horizontal line? Describe. The marginal cost of capital schedule is graphic depiction of the weighted average cost of capital at distinct levels of financing. The MCC sch

  • Q : Role of depreciation in estimating

    What kind of role does depreciation play in estimating incremental cash flows? Depreciation expense is a tax deductible expense and therefore affects cash flow through its effect on taxes. Depreciation expense which is incremental to a proposed

  • Q : What are Authorized Positions

    Authorized Positions: As replicated in the Governor’s Budget (Expenditures by Category and modifications in Authorized Positions), corresponds with the “Total, Authorized Positions” illustrated in the Wages and Salaries.

  • Q : Why do analysts compute financial ratios

    Why do analysts compute financial ratios? Ratios are comparative measures.  Since the ratio illustrates relative value, they let financial analysts to compare information which could not be compared in its raw form.  For instance, rati

  • Q : Explain Budget—Program or Traditional

    Budget—Program or Traditional: A program budget states the operating plan in terms of the costs of activities (that is, programs) to be undertaken to attain particular goals and objectives. A traditional (or object of expenses) budget expresses