In the country of Borealis, the minimum amount of consumption spending that will occur is $300—that is, no matter what level of income households have, the aggregate amount of consumption spending in the economy will be at least $300. In addition, for every extra dollar of national income, consumption spending will increase by $0.75.Planned investment spending in Borealis is $100, and Government spending on goods and services is also $100. Taxes, transfers, exports and imports all equal zero.a. Write out the planned Aggregate Expenditure function for Borealis.b. Solve for the income-expenditure equilibrium level of real GDP. (Note: in addition to providing a numerical answer, you must show your work. You may use either a table or algebra to arrive at your answer. If you want to use a table, you may fill in Table 1. If you use the table, you do not need to fill in all the blank cells. You may just fill in enough cells to help you arrive at your answer.) FILL IN TABLE IF YOU ARE USING THE TABLE TO SUPPORT YOUR ANSWER. IF YOU ARE USING ALGEBRA TO ANSWER THE QUESTION YOU CAN JUST SHOW YOUR WORK BELOW AND YOU DO NOT NEED TO ALSO FILL IN THE TABLE.]**Table 1. Optional use with part (b)**| Real GDP | Disposable Income (YD) | Consumption (C) | Planned Investment (IP) | Government Spending (G) | Planned Aggregate Expenditure (AEP) | Unplanned Investment (IU) ||----------|----------------------------------|-----------------|--------------------------|-------------------|---------------------------------|-------------------------|| | | | | | | || | | | | | | || | | | | | | || | | | | | | || | | | | | | |The table is meant to help solve part (b) by calculating values for these economic variables.

C=300+0.75Y I=100 G=100 X=M=T=0

In the country of Borealis, the minimum amount of consumption spending that will occur is $300 - that is, no matter what level of income households have, the aggregate amount of consumption spending in the economy will be at least $300. In addition, for every extra dollar of national income, consumption spending will increase by $0.75.

In the country of Borealis, the minimum amount of consumption spending that will occur is $300 - that is, no matter what level of income households have, the aggregate amount of consumption spending in the economy will be at least $300. In addition, for every extra dollar of national income, consumption spending will increase by $0.75.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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