Question
Output and income are in equilibrium when planned expenditures C + I + X - IM are equal to national income, in other words, Y
Output and income are in equilibrium when planned expenditures C + I + X - IM are equal to national income, in other words, Y = AE.
a)Suppose the consumption function is C = 120 + 0.83Y, investment is 22, exports are 26, and imports are IM = 68 + 0.08Y. Draw a diagram showing the aggregate expenditure function.
Aggregate Expenditure
b)Using your diagram, a numerical example, or an algebraic solution, find equilibrium output and income in this example and show it in the diagram.
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Principles Of Microeconomics 3e By OpenStax
Authors: OpenStax
3rd Edition
1711471496, 978-1711471495
