In an economy without government purchases, transfers, or taxes, and without imports or exports, aggregate autonomous consumer spending is $500 billion, planned investment spending is $250 billion, and the marginal propensity to consume is 0.5.
Write the expression for planned aggregate spending as in Equation 11(26)A-1: AEplanned = A + MPC ×YD + Iplanned.
AEplanned = $ billion + YD + $ billion
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In an economy without government purchases, transfers, or taxes, and without imports or exports, aggregate autonomous consumer spending is $500 billion, planned investment spending is $250 billion, and the marginal propensity to consume is 0.5.
Find the equilibrium value of Y* algebraically.
Y* = $ billion
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Recall the planned aggregate spending can be written as AEplanned = $500 billion + 0.5YD + $250 billion.
What is the value of the multiplier?
The multiplier is .
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Recall the planned aggregate spending can be written as AEplanned = $500 billion + 0.5YD +$250 billion.
How will Y* change if autonomous consumer spending falls to $450 billion?
Equilibrium level of GDP will be $ billion.
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