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Consider the following simplified AE function: AE = 3,000+ 0.6Y+0.25(M/P) where AE is the desired aggregate expenditure, Y is real GDP, M is the private sector's nominal wealth, and P is the price level. Suppose that M is constant and equal to $24,000. a. In the table below compute the private sector's real wealth (M/P) and the intercept term of the AE function for each price level. (Round your responses to the nearest whole number.) Price Level 2 3 4 5 6 M/P 12000 8000 6000 4800 4000 AE Function AE = 6000 +0.6Y AE 5000+ 0.6Y AE 4500 +0.6Y AE 4200 +0.6Y AE 4000 +0.6Y b. 1) Use the line drawing tool two times to draw and label the AF functions that correspond to price Desired Aggregate Expenditure (AE) 20,000 18,000- 16,000- 14,000 12,000- 10,000- 8,000- 6,000- 4,000- 2,000+ 0- Aggregate Expenditure Function 0 5,000 10,000 45 line 15,000 20,000 Q G

Consider the following simplified AE function: AE = 3,000+ 0.6Y+0.25(M/P) where AE is the desired aggregate expenditure, Y is real GDP, M is the private sector's nominal wealth, and P is the price level. Suppose that M is constant and equal to $24,000. a. In the table below compute the private sector's real wealth (M/P) and the intercept term of the AE function for each price level. (Round your responses to the nearest whole number.) Price Level 2 3 4 5 6 M/P 12000 8000 6000 4800 4000 AE Function AE = 6000 +0.6Y AE 5000+ 0.6Y AE 4500 +0.6Y AE 4200 +0.6Y AE 4000 +0.6Y b. 1) Use the line drawing tool two times to draw and label the AF functions that correspond to price Desired Aggregate Expenditure (AE) 20,000 18,000- 16,000- 14,000 12,000- 10,000- 8,000- 6,000- 4,000- 2,000+ 0- Aggregate Expenditure Function 0 5,000 10,000 45 line 15,000 20,000 Q G

ENGR.ECONOMIC ANALYSIS
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 the following simplified AE function: AE = 3,000+ 0.6Y+0.25(M/P) where AE is the desired aggregate expenditure, Y is real GDP, M is the private sector's nominal wealth, and P is the price level. Suppose that M is constant and equal to $24,000. a. In the table below compute the private sector's real wealth (M/P) and the intercept term of the AE function for each price level. (Round your responses to the nearest whole number.) Price Level 2 3 4 5 6 M/P 12000 8000 6000 4800 4000 AE Function AE = 6000+ 0.6Y AE = 5000+ 0.6Y AE = 4500 +0.6Y AE = 4200+ 0.6Y AE = 4000+ 0.6Y b. 1.) Use the line drawing tool two times to draw and label the AE functions that correspond to price levels 2 and 6. 2.) Use the point plotting tool to plot and label the equilibrium level of expenditures that correspond to price levels 2 and 6. Carefully follow the instructions above and only draw the required obiects C Desired Aggregate Expenditure (AE) 20,000- 18,000- 16,000- 14,000- 12,000+ 10,000- 8,000- 6,000- 4,000- 2,000- 0+ Aggregate Expenditure Function 0 45° line 10,000 15,000 5,000 Actual Nominal Income (Y) 20,000
Transcribed Image Text:Consider the following simplified AE function: AE = 3,000+ 0.6Y+0.25(M/P) where AE is the desired aggregate expenditure, Y is real GDP, M is the private sector's nominal wealth, and P is the price level. Suppose that M is constant and equal to $24,000. a. In the table below compute the private sector's real wealth (M/P) and the intercept term of the AE function for each price level. (Round your responses to the nearest whole number.) Price Level 2 3 4 5 6 M/P 12000 8000 6000 4800 4000 AE Function AE = 6000+ 0.6Y AE = 5000+ 0.6Y AE = 4500 +0.6Y AE = 4200+ 0.6Y AE = 4000+ 0.6Y b. 1.) Use the line drawing tool two times to draw and label the AE functions that correspond to price levels 2 and 6. 2.) Use the point plotting tool to plot and label the equilibrium level of expenditures that correspond to price levels 2 and 6. Carefully follow the instructions above and only draw the required obiects C Desired Aggregate Expenditure (AE) 20,000- 18,000- 16,000- 14,000- 12,000+ 10,000- 8,000- 6,000- 4,000- 2,000- 0+ Aggregate Expenditure Function 0 45° line 10,000 15,000 5,000 Actual Nominal Income (Y) 20,000
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