Question 1 (5marks)

1. Calculate AE given the information below and completely fill in the table.
2. Where is equilibrium in this economy based on the table?State the level, don't just point to it or highlight it.
3. Using the injections-withdrawals approach, demonstrate that the point you chose in part 2 is the equilibrium.At this point withdrawals = injections.

Taxes: $10 at each level of income

Investments: $15

Government Spending: $25

Total Income(AO)

Taxes

Disposable Income

C

S

I

G

AE

100

125

105

135

120

145

140

150

150

155

170

160

180

170

190

180

200

185

240

200

280

215

310

230

Injections-Withdrawals Approach

Item(Name the item here)

Injections(place the $ amount in this column)

Withdrawals(place the $ amount in this column)

Totals

Question2(3marks)

1. What is the multiplier if households have an MPC of 0.6? (1 mark)
2. Assume that the households have an MPC of 0.80 and there is a $9 billion increase to investment spending. For full marks this information must be presented in a table your answers calculated to 2 decimal places and all rows completed. (2 marks)

Change in income

Change in consumption

Change in savings

Round 1

Round 2

Round 3

Round 4

Round 5

All others

Total

Question 3 (2marks)

Name and explain two factors that change aggregate demand, providing an example of each.