Consider an economy with the following data:Equilibrium income = $212.38b consumption expenditure = $155 b

Planned investment = $19 b

Government expenditure = $27 b

Export expenditure = $86 b

Import expenditure = $73 b

Autonomous taxes = $8 b

Income tax rate = 19%

Marginal propensity to save = 0.3

Marginal propensity to import = 0.1

a). If income currently equals $240b calculate the level of autonomous consumption.

b). Calculate autonomous net exports when income is equal to $240b.

c). Calculate the level of actual investment AND unplanned investment when income is equal to $240b (solve answers to two decimal places).

d). Illustrate this economy using the aggregate expenditure model assuming that actual income is $240b and equilibrium income is $212b. On your diagram, identify as required the vertical distance that represents unplanned investment calculated in part 3.

Ensure you label all axis and each component (line) you draw in your diagram.

Answer rating: 100% (QA)

a The consumption expenditure is given by Where C0 autonomous consumption c1 ... View the full answer