Consider an economy where the aggregate planned expenditure (AE) components are given by: Consumption (C) = 1000 + 0.8Y Investment (I) = 200 Government Expenditure (G) = 250 Exports (Ex) = 400 Imports (Im) = 200 + 0.133Y Write the AE equation (simplified). Identify the autonomous component and the induced component. Graph the AE curve. Find and identify on the graph the equilibrium expenditure. Show on your graph the effect of an increase of 60 in government expenditure and find the new equilibrium expenditure. Find the expenditure multiplier.
Consider an economy where the aggregate planned expenditure (AE) components are given by: Consumption (C) = 1000 + 0.8Y Investment (I) = 200 Government Expenditure (G) = 250 Exports (Ex) = 400 Imports (Im) = 200 + 0.133Y Write the AE equation (simplified). Identify the autonomous component and the induced component. Graph the AE curve. Find and identify on the graph the equilibrium expenditure. Show on your graph the effect of an increase of 60 in government expenditure and find the new equilibrium expenditure. Find the expenditure multiplier.
Chapter18: The Keynesian Model
Section: Chapter Questions
Problem 6SQ
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Consider an economy where the aggregate planned expenditure (AE) components are given by:
- Consumption (C) = 1000 + 0.8Y
- Investment (I) = 200
- Government Expenditure (G) = 250
- Exports (Ex) = 400
- Imports (Im) = 200 + 0.133Y
- Write the AE equation (simplified).
- Identify the autonomous component and the induced component.
- Graph the AE curve.
- Find and identify on the graph the equilibrium expenditure.
- Show on your graph the effect of an increase of 60 in government expenditure and find the new equilibrium expenditure.
- Find the expenditure multiplier.
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