ECO 201: PRINCIPLES ECONOMICS I HOMEWORK (The Keynesian Model in Action) 1- Please explain the determination of equilibrium real GDP by drawing an abstract graph of the aggregate expenditures model. Label the aggregate expenditure line AE and the aggregate output lien Y. Explain why the interaction of AE and Y determines the Keynesian equilibrium level of real GDP. 2- Assume that the value of the MPC does not change as real GDP changes. Also, assume that the values represent billions of 2009 dollars. Real GDP (Y) Consumption (C) Planned Investment (I) Government Purchases (G) Net Exports (NX) Planned Aggregate Expenditure (AE) Unplanned Change in Inventories $ 9,000 $ 7,600 $1,200 $1,200 -$400 10,000 8,400 1,200 1,200 -400 11,000 1,200 1,200 -400 12,000 1,200 1,200 -400 13,000 1,200 1,200 -400 a) Please fill in the missing values in the table. b) What is the value of MPC? c) What is the value of equilibrium real GDP