The above table presents data for the nation of Economica
a. What is the aggregate planned expenditure and unplanned inventory change at each level of real GDP?
b. At what level of real GDP is equilibrium expenditure achieved?
a. When real GDP is $0, aggregate planned expenditure (the sum of C + I + G + X - M) equals $4.5 trillion and unplanned inventory change (the difference between GDP and aggregate planned investment) is -$4.5 trillion. When real GDP is $2.5 trillion, aggregate planned expenditure is $5.5 trillion and unplanned inventory change is -$3.0 trillion. When real GDP is $5.0 trillion, aggregate planned expenditure is $6.5 trillion and unplanned inventory change is -$1.5 trillion. When real GDP is $7.5 trillion, aggregate planned expenditure is $7.5 trillion and unplanned inventory change is $0. And when real GDP is $10 trillion, aggregate planned expenditure is $8.5 trillion and unplanned inventory change is $1.5 trillion.
b. Equilibrium expenditure occurs when unplanned inventory change is $0, or, equivalently, when real GDP equals aggregate planned expenditure. In this problem, equilibrium expenditure occurs when real GDP is $7.5 trillion.
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