Suppose a simple economy has no government, so that the aggregate expenditure function is: AE = C +1+X - IM where X = 70 and IM = 10 + 0.15Y. The following graph is the Únited Kingdom's consumption schedule and the amount of investment is $40 billion. a) Plot the aggregate expenditures and the equilibrium point. Aggregate Expenditures 480- 420- 360- 300- 240- 180- 120-45 degree- 60- 60 120 180 240 300 360 420 480 Reset GDP (billions of dollars) b) What is the equilibrium GDP? Equilibrium GDP = $Obilion Aggregate expenditures (billions of dollars)

Suppose a simple economy has no government, so that the aggregate expenditure function is: AE = C +1+X - IM where X = 70 and IM = 10 + 0.15Y. The following graph is the Únited Kingdom's consumption schedule and the amount of investment is $40 billion. a) Plot the aggregate expenditures and the equilibrium point. Aggregate Expenditures 480- 420- 360- 300- 240- 180- 120-45 degree- 60- 60 120 180 240 300 360 420 480 Reset GDP (billions of dollars) b) What is the equilibrium GDP? Equilibrium GDP = $Obilion Aggregate expenditures (billions of dollars)

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter9: Aggregate Demand

Section: Chapter Questions

Problem 4.8P

See similar textbooks

Similar questions

Required information Skip to question C = 800 + 0.8Y I = 1200 XN = 500 - 0.2Y G = 2000 Refer to the information above to answer this question. What is the equation for aggregate expenditures? Multiple Choice AE = 4,500. AE = 3,500. AE = 4,500 + Y. AE = 4,500 + 0.6Y. AE = 11,250 + 0.6Y.
Below is some data for a hypothetical economy: C = -232 + 0.8Y XN = 107 - 0.1Y I = 100 T = 340 G = 340 Refer to the information above to answer this question. What is the value of the expenditure multiplier? a. 1.43 b. 4 c. 3.33 d. 2.43
Aggregate expenditure is 790. Income is 730 and consumption is 720, income increases to 750 and consumption increases to 736. There is an increase in consumer spending of 3. ( Please specifically respond the What will the new level of aggregate expenditure be ) What will the MPC be What will the MPS be What will the multiplier be What will the new level of aggregate expenditure be
With following values, c = 0,7, t = 0,41 and m = 0,86 use the multiplier and calculate the potential impact of the President’s R791 billion infrastructure investment plan on the value of GDP in 2021.
Y=E Autonomous expenditure = 3500 Equilibrium income = 9800 Full employment level of income is = 14000 i. Illustrate the above using a well labelled diagram. ii. What is the value of the multiplier in this economy? iii. Give the equation of the aggregate expenditure line.
Consider an economy in which investment is $200, government purchases are $500, net exports are $30, and the price level is fixed. Taxes vary with income, and as a result, the consumption schedule looks like that shown in the following table. Fill in the missing values. Graph the aggregate expenditure graph using the above data. This is the graph with Aggregate Expenditures on the Y axis and Real GDP on the x axis. Start with a forty five degree line. Suppose that full employment comes at GDP=$1,480. Is the economy in an inflationary or recessionary gap? What action would you take to close the gap?
The accompanying graph represents the aggregate consumption function for the small island nation of Pineapple Paradise. The people of Pineapple Paradise expect their future disposable income to increase. Use the graph to show an increase in consumption expenditures. What is the new level of aggregate autonomous consumer spending? 1 $1000 2 $3000 3 $2000 4 $4000
Table 2 shows elements in the national income accounts of an economy. Assume the economy is currently in equilibrium. Elements £ billions Consumption (total) 80 Investment 9 Government Expenditure 6 Imports 15 Exports 8 What is the current equilibrium level of income? What is the level of injections? What is the level of withdrawals? If national income now rises by £22 billion and as a result, the consumption of domestically produced goods rises to £80 billion. Calculate the marginal propensity to consume (MPC)What is the value of the multiplier? What is the value of the multiplier? Comment on the results in part (3) and (4).
Suppose an economy with the following characteristics.Y = Real GDP or national incomeT = Taxes = 0.3YC = Consumption = 140 + 0.9(Y – T)I = Investment = 400G = Government spending = 800X = Exports = 600M = Imports = 0.15YGiven the information above What is the equation for Aggregate Expenditures (AE) in this economy?
Suppose the following table shows the components of aggregate expenditure for an economy when disposable income is $200 billion and when it is $400 billion: Disposable Income $200 billion $400 billion Consumption $300 billion $400 billion Investment $100 billion $100 billion Government Purchases $175 billion $175 billion Net Exports $200 billion $180 billion Aggregate Expenditure $775 billion $855 billion On the following graph, use the blue curve to plot government purchases as a function of disposable income:
Examine the graph above. Suppose that government increases its spending, shifting the aggregate expenditure line upwards. GDP increases from GDP1 to GDP2, and this amount is $550 billion. If the MPC is 0.8, calculate the difference between the points N and L to find out by how much the government spending changed.