Complete each of the following economic problems.
Use the national income data in the table below to compute the following:
|National Income Accounting Data||Amount (Billions)|
|Compensation of employees||$288.2|
|U.S. exports of goods and services||63.4|
|Consumption of fixed capital||23.6|
|Taxes on production and imports||28.8|
|Net private domestic investment||104.2|
|U.S. imports of goods and services||33.0|
|Net foreign factor income||4.4|
|Personal consumption expenditures||438.2|
Compare a $30,000 income in 1975 to that in 2015, and analyze the following questions:
- How is the availability of products expected to change over the years?
- How is the quality of products likely to change over the years?
- How would your standard of living change over the years?
- Given a choice, would you choose to live in 1975? Why or Why not?
- In the aggregate demand model in equilibrium, GDP (Y) = C + I + X (open economy).
- Where C = consumption schedule = 100 + .75Y (consumption is a function of income).
- Where I = planned investment = 20 and X = net exports = 40. Both are independent of GDP (Y).
Use the information provided above to complete the following:
- Calculate the equilibrium level of income or real GDP for this economy.
- What happens to equilibrium Y if Ig changes to 15?
- What does this outcome reveal about the size of the multiplier?
- Can there be equilibrium level of output at below full employment?
Answer the following questions regarding public and private goods:
- What is the difference between a public good and a private good? What are the principal characteristics of each?
- What are the two characteristics of public goods? Why is there a free rider problem when it comes to public goods?
- Do you consider your local police force a public good or a private good? Why?
- How about your local cable TV service? Explain your answer.
- United States Census Bureau. (n.d.). Current population survey annual social and economic supplement (CPS ASEC). Retrieved from https://www.census.gov/hhes/www/poverty/publicatio…
- United States Census Bureau. (n.d.). Income data. Retrieved from http://www.census.gov/hhes/www/income/
- Russell Sage Foundation. (n.d.). Chartbook of social inequality. Retrieved from http://www.russellsage.org/sites/all/files/chartbo…
- Beggs, J. (n.d.). The production possibilities frontier. Retrieved from http://economics.about.com/od/production-possibili…
- Beggs, J. (n.d.). Supply and demand equilibrium. Retrieved from http://economics.about.com/od/market-equilibrium/s…
- McAfee, P. R. (2006). Introduction to economic analysis. Retrieved from http://www.mcafee.cc/Introecon/IEA.pdf