The data in columns 1 and 2 in the table below are for a privateclosed economy.
GDP | A.E. Private Closed Economy | Exports | Imports | Net Exports | A.E. Private Open Economy |
200 | 240 | 20 | 30 | | |
250 | 280 | 20 | 30 | | |
300 | 320 | 20 | 30 | | |
350 | 360 | 20 | 30 | | |
400 | 400 | 20 | 30 | | |
450 | 440 | 20 | 30 | | |
500 | 480 | 20 | 30 | | |
550 | 520 | 20 | 30 | | |
a. Use columns 1 and 2 to determine the equilibrium GDP for thishypothetical economy.
b. Now open up this economy to international trade by includingthe export and import figures of columns 3 and 4. Fill in columns 5and 6 and determine the equilibrium GDP for the open economy. Whatis the change in equilibrium GDP caused by the addition of netexports?
c. What is the multiplier in this example?
