Question 1

a.Calculate AE given the information below and completely fill in the table. There is a practice exercise in Module 7. Please attempt the practice first.

b.Where is equilibrium in this economy based on the table? State the level, don't just point to it or highlight it.

Equilibrium occurs at the point where Total Income (AO) = Aggregate Expenditure (AE)

i.e. at AO = 280

c.Using the injections-withdrawals approach, demonstrate that the point you chose in part 2 is the equilibrium. At this point withdrawals = injections. Go to Chapter 11 if you forget how this is calculated. (

Withdrawals = Injections

Withdrawals include Taxes (T), Imports(M) and Savings(S) while Injections comprise Government spending (G), exports (X) and Investments (I)

At AO = 280

T+M+S = 10+0+50 = 60

G+X+I = 35+0+25 = 60

We can see that 60 = 60 hence we can conclude that the point where AO = 280 is the equilibrium.

Taxes: $10 at each level of income

Investments: $25

Government Spending: $35

Above are the answer for Question 1 that will help you answer question 2 and 3

Question 2

a.What is the multiplier if households have an MPC of 0.8?

b.Create a table similar to Figure 10.8 in your textbook. Assume that the households have an MPC of 0.60 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.

Question 3

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

Check pictures for question 1 table(Answered) and question 2 table (Need to be answered) with question 3