Suppose the aggregate expenditure schedule for an economy is given by the equation: AE = 800 + 0.8Y Where AE represents the aggregate expenditure and Y represents the national income (output) level. Calculate the equilibrium level of national income in this economy.

Suppose the aggregate expenditure schedule for an economy is given by the equation: AE = 800 + 0.8Y Where AE represents the aggregate expenditure and Y represents the national income (output) level. Calculate the equilibrium level of national income in this economy.

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter23: The Aggregate Expenditure Model

Section: Chapter Questions

Problem 3P

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Question

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Suppose the aggregate expenditure schedule for an economy is given by the equation:

AE = 800 + 0.8Y

Where AE represents the aggregate expenditure and Y represents the national income (output) level.

Calculate the equilibrium level of national income in this economy.

Definition Definition Monetary value of all goods and services produced in an economy during a financial year. National income also refers to the total income earned by the factors of production during a financial year.

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Step 1: Understand the aggregate expenditure model

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Step 2: Set aggregate expenditure equal to national income

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Step 3: Solve for the equilibrium level of national income

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