(a) We can construct an expenditure function for Nicholsville by adding together the different components of expenditure:
Expenditure = Consumption + Investment + Government Spending + Net Exports
In this case, we are given that consumption is equal to $50, investment is equal to $300, government spending is equal to $300, and net exports is equal to $50 - $100 = -$50. Plugging these values into the expenditure function, we get:
Expenditure = $50 + $300 + $300 + (-$50)
Expenditure = $600
Thus, the expenditure function for Nicholsville is:
Expenditure = $600
(b) The trade balance is the difference between exports and imports. In this case, we are given that exports are equal to $50 and imports are equal to $100. The trade balance is therefore equal to $50 - $100 = -$50. This means that Nicholsville has a trade deficit of $50.
(c) The federal budget is the difference between government spending and tax revenue. In this case, we are given that government spending is equal to $300 and tax revenue is equal to $300, since we are told that the government is running a balanced budget. Therefore, the federal budget is equal to $300 - $300 = $0.
(d) The equilibrium level of output is the level of output at which the economy's total expenditure is equal to its total output. In this case, we are given that the economy's full-employment GDP is equal to $2000, and that the marginal propensity to consume is equal to 0.6. Therefore, the equilibrium level of output is equal to $2000 / (1 - 0.6) = $5000.
(e) The GDP gap is the difference between the economy's actual output and its full-employment output. In this case, we are given that the economy's actual output is equal to $600, and its full-employment output is equal to $2000. The GDP gap is therefore equal to $2000 - $600 = $1400.
(f) In order to achieve full-employment GDP, investment spending would have to increase by $1400. This is because we are given that the marginal propensity to consume is equal to 0.6, which means that an additional $1 of investment would lead to an increase in total expenditure of $1 / (1 - 0.6) = $2.5. Therefore, an increase in investment spending of $1400 would lead to an increase in total expenditure of $1400 * 2.5 = $3500, which is equal to the difference between the economy's current output and its full-employment output