Consider an economy where the aggregate planned expenditure (AE) components are given by:Consumption (C) = 1000 + 0.8YInvestment (I) = 200Government Expenditure (G) = 250Exports (Ex) = 400Imports (Im) = 200 + 0.133YWrite the AE equation (simplified).Identify the autonomous component and the induced component.Graph the AE curve.Find and identify on the graph the equilibrium expenditure.Show on your graph the effect of an increase of 60 in government expenditure and find the new equilibrium expenditure.Find the expenditure multiplier.

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ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Consider an economy where the aggregate planned expenditure (AE) components are given by:

Consumption (C) = 1000 + 0.8Y
Investment (I) = 200
Government Expenditure (G) = 250
Exports (Ex) = 400
Imports (Im) = 200 + 0.133Y

Write the AE equation (simplified).
Identify the autonomous component and the induced component.
Graph the AE curve.
Find and identify on the graph the equilibrium expenditure.
Show on your graph the effect of an increase of 60 in government expenditure and find the new equilibrium expenditure.
Find the expenditure multiplier.

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