PROBLEM: Your country generally spends $_80_ out of every $100 of income generated in a year. We also know that if income happened to be zero that there would still be expenditures of $_200_ necessary for the population to survive.

1)Derive/build the Aggregate Expenditure equation for your country and solve for the expenditure equilibrium level of income. MPE [1 mark], AE Function [1 mark], solve for Ye [2 marks].

2)Draw an AE diagram for you country labeling: both axes [.5 marks each], the AE function [.5 marks], the AE=Y expenditure equilibrium condition line [.5 marks], and the actual level of Y at equilibrium (a number) [.5 marks] and autonomous spending (a number) [.5 marks].

3)What is the slope of your county's AE line? [1 mark]

What IS this number (Hint: What does it represent? Define it in words). [1 mark]

Calculate the Multiplier in your country. [2 marks]

4)Give an example of what could change that would be considered an autonomous change in spending.[1 mark]

Completely redraw the original AE1 diagram here and then add a new AE2 line clearly showing and labeling a 100 _increase_ in autonomous spending.[1 mark]

What is the new AE equation (not asking you to calculate the expenditure equilibrium level of Y, just write out the new equation please)?[1 mark]

5)Use the Multiplier and the given change in autonomous spending to mathematically find the new equilibrium level of income/production, or alternatively, solve for the new equilibrium level of income/production using the new AE equation and the equilibrium condition if you prefer.