Application questions

Answer the following questions in your text and submit the answers and any supporting spreadsheets.

Application Question 2, page 319

From the Bureau of Economic Analysis Web page (www.bea.gov), compare real GDP for 1970, 1980, 1990, 2000, and 2010. Show the percentage change in real GDP over each of those decades. Do the percentages of GDP spent on consumption (C), investment (I), government (G), exports (X), and imports (M) differ significantly among those years? Are there changes in the balance of trade over the period? Explain.

Application Question 1, page 359

Use the aggregate expenditure model developed in this chapter to explain the following statements:

A – Coming amid continued turmoil in the financial and credit markets, the report sent stocks lower, with the Dow Jones Industrial Average falling 146.70 points Friday to close at 11,893.69.

B – Administration officials said they were confident conditions would improve as tax rebates that are part of the recent $152 billion economic-stimulus package begin to reach consumers.

C – The Fed is expected to cut interest rates again to prop up the economy.

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