Question 7 (i) (ii) (iii) (vi). Consider the economy with following components of aggregate expenditure= Consumption function: C = 25 +0.8 Y Investment function: I=30 Government Expenditures: G=10 Export function: X=7 Import function: M=2+0.2Y There are no taxes, so YD=Y What is the equation of aggregate expenditure function in this economy? Solve mathematically for aggregate expenditure and real GDP. What is induced expenditure in equilibrium? What is the multiplier for this economy? If investment increases by 10, how much will GDP increase? Calculate the new level of real GDP after this increase in investment. (viii). Show the initial and the new equilibrium on a graph.

Question 7 (i) (ii) (iii) (vi). Consider the economy with following components of aggregate expenditure= Consumption function: C = 25 +0.8 Y Investment function: I=30 Government Expenditures: G=10 Export function: X=7 Import function: M=2+0.2Y There are no taxes, so YD=Y What is the equation of aggregate expenditure function in this economy? Solve mathematically for aggregate expenditure and real GDP. What is induced expenditure in equilibrium? What is the multiplier for this economy? If investment increases by 10, how much will GDP increase? Calculate the new level of real GDP after this increase in investment. (viii). Show the initial and the new equilibrium on a graph.

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter9: Aggregate Demand

Section: Chapter Questions

Problem 1.1P

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