Question 1
How will the following situations affect the investment demand curve? Draw a diagram for each to illustrate your answer.
A new type of manufacturing machine has been developed that is not only cheaper but also more energy efficient.
To reduce the fiscal deficit, the government increases corporate taxes.
Unplanned inventories rise to new highs in the economy.
Question 2
The data in the first two columns below are for a private closed economy.
What is the equilibrium GDP for the private closed economy?
Including the international trade figures for exports and imports, calculating net exports, and determining the equilibrium GDP for a private open economy.
What is the size of the multiplier in this economy?
What will happen to equilibrium GDP if exports were $10 billion larger at each level of GDP?
What will happen to equilibrium GDP if exports remained at $15 billion, but imports rose to $15 billion?
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