Suppose output is $35 billion, government purchases are $10 billion, consumption is $15 billion, and net exports are $4 billion. Assume net factor payments equal 0.(a)Calculate the equilibrium amount of investment. Show your work.(b)Calculate the equilibrium amount of absorption. Show your work.(c)Calculate the equilibrium amount of the financial account balance. Show your work.
What will be an ideal response?
| (a) | I = Y - (C + G + NX) = 35 - (15 + 10 + 4) = 6. |
| (b) | Absorption = C + I + G = 15 + 6 + 10 = 31. |
| (c) | FA = -NX = -4. |
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