Question: Question 1 Use the data below to answer the questions. Make sure to show your work for the full mark. C= 105+.85Y D I =

Question 1

Use the data below to answer the questions. Make sure to show your work for the full mark.

C= 105+.85Y_D

I = 500

G= 610

X= 600

M= .1Y

T= .25Y

(i)Find the Aggregate Expenditure (AE) equation,equilibrium incomeand the size of themultiplier.

(ii) Return tothe same informationabove andassume there isnoGovernmentand the economy does not engage in international trade.

(a)Find the Aggregate Expenditure (AE) equation,equilibrium incomeand the size of themultiplierin this economy with no international trade and no government.

(b)Explain the differences in level of equilibrium income and size of multiplier in (i) and (iia).

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