Consider an economy defined by the following functions (assume prices are fixed):

S = -760 + 0.15YdIp= 320

G = 350

T = 200

X = 180

IM = 60 + 0.1Y

a. Find the aggregate expenditure (AEp) function for this economy, calculate the equilibrium level of GDP (Ye), and graph your AEpfunction below. Label all axes, intercepts, and other relevant points.

b. Calculate the level of savings at the equilibrium level of output.

c. If potential output (Y*)=6,000, state whether the economy is in a recessionary or inflationary gap and calculate the size of the gap.

d. Now suppose that income (GDP or Y) in this economy rises by $1 (startingat any initial level).

1. By how much will the level of spending on allconsumptiongoods change?
2. By how much will the level of spending onimportschange?
3. By how much will the level ofspending on domestic goodschange?