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

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