$$\begin{array} { c c c c }
\begin{array} { c }
\text { Real GDP, } Y \
\text { (billions of 2005 } \
\text { dollars) }
\end{array} & \begin{array} { c }
\text { Consumption } \
\text { expenditure, } C
\end{array} & \begin{array} { c }
\text { (billions of 2005 } \
\text { Investment, } I
\end{array} & \begin{array} { c }
\text { Government } \
\text { expendithare, } G
\end{array} \
\text { (billions of 2005 } & \begin{array} { c }
\text { (billions of 2005 } \
\text { dollars) }
\end{array} & \text { dollars) } \
\hline 100 & 150 & 150 & 150 \
200 & 200 & 150 & 150 \
300 & 250 & 150 & 150 \
400 & 300 & 150 & 150 \
500 & 350 & 150 & 150 \
600 & 400 & 150 & 150 \
700 & 450 & 150 & 150 \
800 & 500 & 150 & 150 \
900 & 550 & 150 & 150 \
\hline
\end{array}$$
-The above table gives data for the nation of Mouseville.There are no imports into or exports from Mouseville.Aggregate planned expenditure is less than actual expenditure if real GDP is
A) more than $800 billion.
B) less than $800 billion.
C) $800 billion.
D) more than $700 billion.
E) less than $700 billion.

Question

$$\begin{array} { c c c c } 
\begin{array} { c } 
\text { Real GDP, } Y \
\text { (billions of 2005 } \
\text { dollars) }
\end{array} & \begin{array} { c } 
\text { Consumption } \
\text { expenditure, } C
\end{array} & \begin{array} { c } 
\text { (billions of 2005 } \
\text { Investment, } I
\end{array} & \begin{array} { c } 
\text { Government } \
\text { expendithare, } G
\end{array} \
\text { (billions of 2005 } & \begin{array} { c } 
\text { (billions of 2005 } \
\text { dollars) }
\end{array} & \text { dollars) } \
\hline 100 & 150 & 150 & 150 \
200 & 200 & 150 & 150 \
300 & 250 & 150 & 150 \
400 & 300 & 150 & 150 \
500 & 350 & 150 & 150 \
600 & 400 & 150 & 150 \
700 & 450 & 150 & 150 \
800 & 500 & 150 & 150 \
900 & 550 & 150 & 150 \
\hline
\end{array}$$
-The above table gives data for the nation of Mouseville.There are no imports into or exports from Mouseville.Aggregate planned expenditure is less than actual expenditure if real GDP is
A) more than $800 billion.
B) less than $800 billion.
C) $800 billion.
D) more than $700 billion.
E) less than $700 billion.

Quizplus · Accepted Answer

Aggregate planned expenditure is the sum of consumption expenditure (C), investment (I), and government expenditure (G). In the table, these three components have fixed values of 150 billion each. Therefore, aggregate planned expenditure is always 450 billion, regardless of the level of real GDP.
Actual expenditure, on the other hand, increases as real GDP increases. This is because as real GDP increases, so does income, and hence consumption expenditure. Therefore, when real GDP is less than $800 billion, actual expenditure is less than aggregate planned expenditure; when real GDP is exactly $800 billion, actual expenditure is equal to aggregate planned expenditure; and when real GDP is more than $800 billion, actual expenditure is greater than aggregate planned expenditure.
Therefore, the best choice is A) more than $800 billion.

-The Above Table Gives Data for the Nation of Mouseville