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

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter2: Mathematics For Microeconomics

Section: Chapter Questions

Problem 2.3P

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