Problem 1: Aggregate Expenditure Function (AEF) to Aggregate Demand (AD) [10 Points] Suppose that the economy is at the price level of p = 200. At p = 200, the functions for C, I, G, and NX are given by: C=800+0.8Y I = 250 G = 350 NX = 200 0.05Y 1. What is the AEF at p = 200? What is equilibrium Desired Real GDP at p = 200? [2 points] Now also suppose that for every $10 increase in p, C drops by $3 and NX drops by $2. G and I are not affected by p. 2. What is the AEF at p = 400? What is equilibrium Desired Real GDP at p = 400? [2 points] Note that we assume that Aggregate Demand (AD) is always linear. 3. Given your answers to Q1 and Q2, what must be Aggregate Demand (AD) in this economy? Write it out in the form of: (Y = a - bp) - - so you must solve for "a" and "b". [4 points] Instead, the AEF could be written to include p using: AE = 1,600 +0.75Y+ 0.5(200 - p) 4. Use the above expression to isolate for an expression for Y as a function of p. Write it out in the form of: (Y = a - bp) - so you must solve for "a" and "b". What is Y when p = 200? What is Y when p = 400? [2 points]