Principles of Economics: Problems: Income-Expenditure Framework: Income and Expenditure Disequilibrium II
Principles of Economics: Problems: "Say's Law": Depression

Principles of Economics: Problems: Income-Expenditure Framework: Disequilibrium III

Consider an economy like the U.S., only with all planned spending categories in round numbers:

  • C--consumption spending on domestically-produced goods--$9 trillion/year
  • I--business investment spending--$2 trillion/year
  • G--government purchases--$2 trillion/year
  • X--exports of goods and services--$2 trillion/year

    1. What is total planned spending E in this economy this year?

    2. If the economy is in equilibrium--if people are actually able to buy all the currently-produced goods and services they plan to--what will total income Y be in the economy this year?

3. Suppose that less is produced than was planned to spend. What will happen to inventories?

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