Macroeconomics Answers

1. What is an investment schedule and how does it differ from an investment demand curve?
3. Why is saving called Leakage? Why is planned investment called injection? Why must saving equal planned investment at equilibrium GDP in the private closed economy? Are unplanned changes in inventories rising, falling, or constant at equilibrium GDP? Explain.

Find Real GDP, assuming the GDP price index is 113.4 given:
Corporate Profits 31
Consumption of Fixed Capital 35
Gross Private Domestic Investment 106
Personal Taxes 56
Personal Saving 82
Government Purchases 128
Imports 85
Interest 59
Net Foreign Factor Income Earned 2
Undistributed Corporate Profits 5
Exports 67
Personal Consumption Expenditures 377
Statistical Discrepancy 10
Taxes on Production and Imports 25
Social Security Contributions 39
Transfer Payments 48
Rents 13
Proprietors' Income 33
Corporate Income Taxes 6
Compensation of Employees 389

Find National Income given:
Billions of current year
(i.e. nominal) dollars
Corporate Profits 31
Consumption of Fixed Capital 35
Gross Private Domestic Investment 106
Personal Taxes 56
Personal Saving 82
Government Purchases 128
Imports 85
Interest 59
Net Foreign Factor Income Earned 2
Undistributed Corporate Profits 5
Exports 67
Personal Consumption Expenditures 377
Statistical Discrepancy 10
Taxes on Production and Imports 25
Social Security Contributions 39
Transfer Payments 48
Rents 13
Proprietors' Income 33
Corporate Income Taxes 6
Compensation of Employees 389

Find Nominal GDP using the INCOME approach given:

Corporate Profits 31
Consumption of Fixed Capital 35
Gross Private Domestic Investment 106
Personal Taxes 56
Personal Saving 82
Government Purchases 128
Imports 85
Interest 59
Net Foreign Factor Income Earned 2
Undistributed Corporate Profits 5
Exports 67
Personal Consumption Expenditures 377
Statistical Discrepancy 10
Taxes on Production and Imports 25
Social Security Contributions 39
Transfer Payments 48
Rents 13
Proprietors' Income 33
Corporate Income Taxes 6
Compensation of Employees 389

Find Nominal Gross Domestic Product (GDP) using the EXPENDITURE approach given:

Corporate Profits 31
Consumption of Fixed Capital 35
Gross Private Domestic Investment 106
Personal Taxes 56
Personal Saving 82
Government Purchases 128
Imports 85
Interest 59
Net Foreign Factor Income Earned 2
Undistributed Corporate Profits 5
Exports 67
Personal Consumption Expenditures 377
Statistical Discrepancy 10
Taxes on Production and Imports 25
Social Security Contributions 39
Transfer Payments 48
Rents 13
Proprietors' Income 33
Corporate Income Taxes 6
Compensation of Employees 389

· Write a 200-word paper about the following situation.
o Consider the following: The city council has just approved the construction of a water park in your town. You are responsible for studying the impact of the new water park on the local economy and surrounding community.
§ You know that the water park will increase the traffic flow in the streets around the water park. There are both businesses and neighborhoods adjacent to the increased traffic flow. The cost to the community is estimated to be $6 per person. What kind of externality is this? Why?
§ Graph the market for water park business, labeling the demand curve, the social-value curve, the market equilibrium level of output, and the efficient level of output.
§ What is the per-unit amount of the externality?
§ You also know that the water park will have events in the evening. This will increase both foot traffic and street traffic at night. You believe this will improve the safety of the surrounding businesses, with an estimated benefit of $3 per water park attendee. What kind of externality is this? Why?
§ Create a new graph illustrating the market for water park business for these two externalities. Label the demand curve, the social-value curve, the market equilibrium level of output, and the efficient level of output.
§ What is the per-unit amount of both externalities?
§ Discuss both government and private solutions that would result in an efficient outcome.

Graph the market for water park business, labeling demand curve, social curve, market equilibrium level of output, and efficient level of output.
What is per unit amount of externality?
Increasing foot and street traffic at night, this will improve safety around businesses with an estimated benefit of $3 per water park attendee. What kind of externalities is this? why?
Create new graph illustrating market for water park business for these two externalities, labeling same info as other graph
What is the per unit amount for both externalities?

Assume the following information for an imaginary, closed economy (that is, there are no exports or imports). GDP = $120,000; consumption = $85,000; private saving = $7,000; national saving = $14,000.

a. What is the amount of investment in this economy?
$0