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Microeconomic Theory

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter7: Uncertainty

Section: Chapter Questions

Problem 7.12P

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Question

The autonomous consumption
expenditures and autonomous investment
expenditures in an economy are $600 and
$350, respectively. It is also observed that
individuals spend
70% of their additional income on
consumption. Write down the consumption
function for this economy using the
information provided above. (Round your
response for the intercept term to the
nearest whole number and for the slope
term to one decimal place.)
C . +..Y
Write down the aggregate expenditure
function for this economy using the
information provided above. (Round your
response for the intercept term to the
nearest whole number and for the slope
term to one decimal place.)
AE =..+..Y
•..
The equilibrium income that would set the
actual national income to the desired
aggregate expenditure is $. (Round your
response to the nearest dollar.)
If the actual national income were $1,584 in
this economy, then the inventories of the
firms would be failing or rising
and firms would reduce or increase their
output.

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