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uestion 1: Macroeconomic E uilihrium Suppose that we are in an economy where Income is made up of iust Consumption {C} and investment {I}. There is no Government Spending [G = D} and no trade [Nit = 01. The Aggregate Expenditure Function is given by: AEF = 4-00 + 0.65? Given this AEF, answer the following questions: a] At what level of output {Y}, would the eoonomy be in equilibrium? b} Suppose instead that output begins at 51,400. What would we expect to happen to Y? Why would this adjustment occur? ti Suppose that there was an increase in desired investment of 5100. What happens to the AEF? what would happen to Y\"? cl} Suppose that Instead of investment Increasing. the Marginal Propensity to Consume increased by 0.1. What happens to the AEF? What would happen to 3"? Question 2:The Multigier Here we will consider a different AEF than before: AEF = BUD +1.75?\" We want to think specifically about the simple multiplier here. Suppose here that there is a Government. We will keep them lumped into C for this question, and not have a separate G. but we will assume that the government does place autonomous expenditures as well. Suppose that the government wants to increase Y, and so inane-ates government spending by $160. The government spends this money at a local store a} How much will equilibrium Y\" increase in total from this expenditure? Consider the store -owner. b] How much more will that household consume and how much more will they now save?I Suppose thisstore owner spends their consumption attheirneighhours' store. :] How much more will their neighbours now consume and how much more will they now save? d] How much has savings increased in totalfrom this expenditure