Question

's at purch Model, pages 772-775 ow macroeconomic equilibrium is determined in the aggregate re by local and Comment pe or local from an online site in Secure bases 250 new . cornment purch Security pay ments by locale finefighters. The th at the price level in sells $1 billion of computer chips to computers. How does e levels in other ca States relative to and the exchange t of spending del focuses on OP in the short any particular otal spending r components anned invest- S (NX). When an unplanned ve been pro- loyment will GDP, there is Cotal employ- qual to GDP and employ- n macroeco- d. Joe Jones orders a Burberry coat from an the United Kingdom. e Prudential insurance company purchases 250 iPads from Apple. 1.5 Assume that Intel sells $1 billion of com Dell, Inc., for use in Dell's personal computers. How this transaction affect aggregate expenditure? 1.6 In reporting on real GDP growth in the second quarte 2015, an article in the Wall Street Journal noted that the percent annual growth rate "would have been strong hadn't been for companies drawing down inventories. a. If companies are "drawing down inventories," is a pre gate expenditure likely to have been larger or smaller than GDP? b. Assume that the reduction in inventories was unplanned What would you expect to happen to production in the future following an unplanned reduction in inventories? Source: Justin Lahart, "Consumers Priming U.S. Pump." Wall Street Journal. July 30, 2015. Lab Visit www.mye exercises online Jaview Questions In the aggregate expo w know the factors ing investment spend aports? these EN 1 What are the five m spending? Which of would a rise in stock sumption spending? Cure macro- to invento- anning of an 3 Compare what hapi 1979 and the second wreal consumption penditure rowth, the ment? 1.7 In the third quarter of 2015, business inventories in the United States increased by $62 billion. Can we tell from this information whether aggregate expenditure was higher or lower than GDP during the third quarter of 2015? If not, what other information do we need? Source: Bureau of Economic Analysis. 1.8 An article in the Wall Street Journal stated that in China. "carmakers continue to grapple with ... rising inven- tories." Why might carmakers in China find that their inventories are unexpectedly rising? How are these car- makers likely to react to the increase in inventories? Source: Colum Murphy, "China's Automobile Sales to Slow Further in 2015." Wall Street Journal, January 12, 2015. 1.9 According to an article in the Wall Street Journal, in late 2014, the Japanese economy experienced a large increase in business inventories. The article noted, "The large buildup of inventories is a reflection that the ... drop in demand was bigger than expected." Does it matter than Japanese firms didn't expect the drop in demand? Won a decline in demand always lead to an increase in firms holdings of inventories? Briefly explain. Source: Eleanor Warnock. "Rising Inventories Hamper Japan Rece ery." Wall Street Journal, September 30, 2014 What are the four ma would a change in int 5 What are the three How would an incre RC nations (Brazil tesports would each s 12 new Dems and Apr ched to the chos US appliance use from

please help me to answer 1.5 - 1.9 thansk

Answer 1

1.5 There will be no effect on Aggregate Expenditure. This is because computer chips are intermediate goods and including them in the value of computer will result in the problem of double counting.

1.6 a) If companies are drawing down inventories then aggregate expenditure likely to have been larger than GDP because more is being bought than produced.

b) If reduction in inventories is unplanned then future production is expected to increase as this will replenish the inventories.

1.7 When Business Inventories increase, this means that aggregate expenditure is less than GDP because more goods have been produced.

1.8 This means that the sales of car makers are less as compared to the planned figure. In this case they will produce lower cars in future.

1.9 Since Japanese firms did not expect drop in demand so, they did not reduce their inventories. No, decline in inventories does not always lead to increase in firm's holding of inventories. This is because sometimes such a decline is anticipated and inventories can be adjusted.