Hi, could you please help me solve questions d, e, and f? Thank you! Question 2Refer to the information provided in Figure 23.9 below to answer the question(s) that follow.Aggregate expenditures($ millions)225200175150AE45°300100 200Aggregate output ($ millions)Figure 23.9a) Refer to Figure 23.9. Write the equation for the aggregate expenditure function (AE). Showyour work.b) Refer to Figure 23.9. What is the equilibrium level of output in this economy? State theequilibrium condition used to determine this.c) Explain the forces that maintain/drive the economy to this equilibrium by considering whatwill happen at the following two levels of output, $300 million and $100 million. You will needto discuss changes in investment through unplanned inventories and the response of output.d) Refer to Figure 23.9. How will equilibrium aggregate expenditure and equilibrium aggregateoutput change as a result of a decrease in investment by $20 million?e) The interest rate is an exogenous factor that effects the level of investment in an economy. Ifthe interest rate decreased, explain what would happen to planned investment. How would youchange the AE line drawn in 23.9 to reflect this change? What would happen to equilibriumoutput?f) Explain what Keynes meant by the phrase "animal spirits." Would animal spirits changethe location of AE and equilibrium output in the graph above? If so, be specific in yourexplanation of how each would change

Investment affects the aggregate demand in the economy. The rise in the investment causes rise in the aggregate expenditure in the economy. Furthermore, the fall in investment brings about decline in the economic activities. d) The decrease in the investment means it will lead to decrease in the aggregate expenditure. Y = C+I+G. The investment (I) is a part of aggregate expenditure. The new equilibrium will be set up below the previous equilibrium or new equilibrium will be below the $ 200 Million. e) Fall in the interest rate makes it inexpensive to borrow money from the market. thus, low interest rate encourages more investment activities of aggregate expenditure increases in the economy. The aggregate expenditure line shifts upward. The graph is as follows: In the above diagram, the Aggregate expenditure line shifts upward. And new equilibrium is established at upper level or employment rises up in the economy. f) Animal spirit term was used by the Keynes to explain the behavior of investors. The investors are driven by the emotions. The investors behaves irrationally and tend to follow the herd behavior. When economy booms, they tend to make more investment and drive up economy further. The low interest rate and high investment would drive up investment further. Thus, economy will boom further.

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Question 2 Refer to the information provided in Figure 23.9 below to answer the question(s) that follow. Aggregate expenditures ($ millions) 225 200 175 150 45⁰ AE 100 200 300 Aggregate output ($ millions) Figure 23.9 a) Refer to Figure 23.9. Write the equation for the aggregate expenditure function (AE). Show your work

Question 2 Refer to the information provided in Figure 23.9 below to answer the question(s) that follow. Aggregate expenditures ($ millions) 225 200 175 150 45⁰ AE 100 200 300 Aggregate output ($ millions) Figure 23.9 a) Refer to Figure 23.9. Write the equation for the aggregate expenditure function (AE). Show your work

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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