Total production of final goods and services equals total expenditures. They both equal _____.

1. total income

2. government taxes

3. producer's profits

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Sonal BahlLv10

25 Jan 2021

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According to the circular-flow diagram, GDP can be computed:

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2. can be computed as the total income paid by firms, but not as expenditures on final goods and services

3. can be computed as expenditures on final goods and services, but not as the total income paid by firms

4. cannot be computed as either total income paid by firms or expenditures on final goods and services

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In the economic of Zip, the marginal propensity to consume is 0.8. Government expenditures on goods and services are 50 billion, and taxes are 60 billion. Zip has no exports and no imports.

1. the government increases its expenditures on goods and servicesto 60 billion. calculate the final change in aggregate demand as aresult of this increase in government expenditures.

2. the government increases taxes to 70 billion. calculate thefinal chage in aggregate demand as a result of this increase intaxes.

3. the government simultaneously increases both its expenditures on goods and services and taxes by 10 billion. what is the net change in aggregate demand? why does aggregate demand increase?