(20 points) The Aggregate Expenditure (AE) model posits that holding prices constant, output (GDP) and therefore, unemployment and inflation rates depend on AE. Aggregate expenditure is defined as: AE = C+Ig + G+ Xn., where C is consumption, Ig is gross private domestic investment, G is government purchases, and Xn is net exports. As the result of the current economic downturn, the forecasters expect real consumer spending to fall by 4.7%, business investments to drop by 24.6%, Government purchases to increase by 10%, and inflation rate to remain flat in 2020. Below is the breakdown of the 2019 Real Gross Domestic Product (GDP) in trillions of dollars. Write a 400-word essay explaining what would be the impact of these changes in spending on the overall real GDP of the United States in 2020, given marginal propensity to consume (MPC) to be equal to 0.6 (Hint: use multiplier effect to look at change in output as the result of change in spending). Note, you must calculate actual changes in each component of spending and use that to come up with your answers. Components of Real GDP (2019) Start typing your answer here: Amount Component (trillions) Percent Personal Consumption $13.28 70% Goods $4.76 25% Durable Goods $1.77 9% Non-durable Goods $3.01 16% Services $8.56 45% Business Investment $3.42 18% Fixed $3.34 17% Non-Residential $2.74 14% Commercial Real Estate $0.54 3% Capital Goods $1.27 7% Intellectual (Software) $0.97 5% Residential $0.59 3% Change in Inventories $0.07 0% Net Exports ($0.95) 5% Exports $2.53 13% Imports $3.49 18% Government $3.30 17% Federal $1.28 7% Defense $0.77 4% State and Local $2.02 10% TOTAL GDP $19.07 100%