Question: THE AGGREGATE EXPENDITURE MODEL (IN THE SHORT RUN) (10 POINTS) C=100 + 0.7*(Y-T) Consumption function!! IP-200 (Planned Investment) G=200 T=100 EX=300 (EX=exports) IM=200 (IM=imports) AE

THE AGGREGATE EXPENDITURE MODEL (IN THE SHORT RUN) (10 POINTS) C=100 + 0.7*(Y-T) Consumption function!! IP-200 (Planned Investment) G=200 T=100 EX=300 (EX=exports) IM=200 (IM=imports) AE = C+ IP + G+ NX (NX=Net Exports) NOTICE THAT: "Y" IS OUTPUT (OR INCOME) THE VALUES ABOVE ARE EXPRESSED IN BILLIONS OF DOLLARS (EXCEPT FOR 0.7). a. Compute the equilibrium level of output (say, YE). Hint: Remember the condition for equilibrium in the SHORT-RUN ( AE= Y ). Hint: Just plug in the values above in the equilibrium condition and then solve for Y. b. Compute the spending multiplier. c. If the government decides to increase its purchases (G) by $900 billion in order to increase (equilibrium) output (YE), how much will output increase

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Economics Questions!

answer all Makeover Inc. believes that at its current stock price of $16.00 the firm is undervalued in the market. Makeover plans to repurchase 2.4 million of its 20 million shares outstanding. The...

The outcome of expansionary monetary policy is decreasing aggregate demand by lowering the interest rate and increasing investment opportunities. * 1 point True False In public and open economy, when...

9:29 PM Fri Mar 31 64% bbprod.hvcc.edu Remaining Time: 1 hour, 37 minutes, 23 seconds. Question Completion Status: QUESTION 41 2 points Save Answer Price level (GDP price index, 2009 = 100) AD 2 AD 3...

The aggregate expenditure model assumes flexible prices * 1 point True False Demand-pull inflation is due to an increase in aggregate demand when * 1 point Aggregate supply is unit elastic Aggregate...

Consider the data presented in the table: Consumption Unplanned Investment Actual Aggregate (C) Planned Government Net Exports points Expenditure or Output (billions of Investment Spending (G) (NX)...

Question 1 Not yet answered Marked out of 1.00 Flag question Question text In the simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption,...

Consider the data presented in the table: Actual Aggregate Expenditure or Output (Y) (billions of $) 410 510 610 710 810 Consumption (C) (billions of $) 210 265 320 375 430 Planned Investment...

2:24 C 50 2013-Revised-M4A1 2 Q . . . Homework 4: Chapter 31 Name: Class: Date: This assignment relates to following learning outcomes: collect information from various sources relating to economic...

zoom in to see pls D Question 3 Which of the following is constant in the aggregate expenditure model? O Consumption Investment O Real GDP None of the above D Question 4 In the aggregate expenditure...

What is an indifference curve and how does a preference map show preferences?

You are a theater owner fortunate enough to book a summer box office hit into your single theater. You are now planning the length of its run. Your share of the films projected box office is R = 10w...

REVIEW EXERCISE 1 0 . 1 The Palm Company - Levering the Unlevered Cost of Capital The Palm Company ( Palm ) is a privately held company and has adopted a capital structure strategy of financing...

At the Earths surface a projectile is launched straight up at a speed of 10.0 km/s. To what height will it rise? Ignore air resistance and the rotation of the Earth.

A model rocket is fired vertically upward from rest. Its acceleration for the first three seconds is a (t) = 60t, at which time the fuel is exhausted and it becomes a freely falling body. Fourteen...

Replace the three forces acting on the plate by a wrench. Specify the magnitude of the force and couple moment for the wrench and the point P(y, z) where its line of action intersects the plate....

Porous particles of activated alumina have a BET surface area of 310 m2/g, a particle porosity of 0.48, and a particle density of 1.30 g/cm3. Determine: (a) Specific pore volume in cm3/g, (b) True...

Carbon molecular sieves are available in two forms from a Japanese manufacturer: Estimate the surface area of eachform. Form A Form B Pore volume, cm/g Average pore diameter 0.38 0.18 5 2.0p 0 um

Based on the following information, determine the unproduced units as result of learning curve of a new equipment. Week Capacity : Learning Curve 1 25% 35% 55% 10,000 10,000 10,000 10,000 10,000...

3. It is the commitment you show that is the deciding factor.

4. It is the principle of equality (according to very specific criteria of equality) that is crucial.

7. As your starting point, take a discussion you have had with a person at your workplace. Answer the following questions: Answer the following questions: What did you want to achieve? How did you...