Question 7 (i) (ii) (iii) (vi). Consider the economy with following components of aggregate expenditure= Consumption function: C = 25 +0.8 Y Investment function: I=30 Government Expenditures: G=10 Export function: X=7 Import function: M=2+0.2Y There are no taxes, so YD=Y What is the equation of aggregate expenditure function in this economy? Solve mathematically for aggregate expenditure and real GDP. What is induced expenditure in equilibrium? What is the multiplier for this economy? If investment increases by 10, how much will GDP increase? Calculate the new level of real GDP after this increase in investment. (viii). Show the initial and the new equilibrium on a graph.

Question 7 (i) (ii) (iii) (vi). Consider the economy with following components of aggregate expenditure= Consumption function: C = 25 +0.8 Y Investment function: I=30 Government Expenditures: G=10 Export function: X=7 Import function: M=2+0.2Y There are no taxes, so YD=Y What is the equation of aggregate expenditure function in this economy? Solve mathematically for aggregate expenditure and real GDP. What is induced expenditure in equilibrium? What is the multiplier for this economy? If investment increases by 10, how much will GDP increase? Calculate the new level of real GDP after this increase in investment. (viii). Show the initial and the new equilibrium on a graph.

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

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Chapter1: Making Economics Decisions

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Step 1: Describe Aggregate Expenditure

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Step 2: Calculate the equation of Aggregate Expenditure ( AE )

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Step 3: Calculate Aggregate expenditure and real Gross Domestic Product

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Step 4: Calculate induced expenditure in equilibrium

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Step 5: Calculate Multiplier for the economy

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Step 6: Calculate the rise in GDP when investment rises

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Step 7: Calculate the new level of real GDP after a rise in investment

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Step 8: Draw initial and new equilibrium

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