The Simple Aggregate Expenditures Model 2. Business journalists, pundits, economists, and policymakers all pay attention to the results of the Conference Board's monthly survey of 5,000 households called the Consumer Confidence Index. When the index is rising, this is good news for the economy, and when it is falling, concerns are often heard that it portends a recession. Why is this survey important as a tool in forecasting where the economy is heading in the near future? The Full Aggregate Expenditures Model 3. If the government is considering reducing taxes to stimulate the economy, does it matter if the MPS is 0.25 or 0.33? What if the government reduces government spending by an equal amount to fund the tax cut? Illustrating the Aggregate Expenditures Model Y =AE 6,500 AE = C + 1 + 6 + DX- M 5,000 4,500 Aggregate Expenditures (AE) 4.000 3,500 3,000 3,000 3,500 4,000 4,500 5,000 5,500 Income () 4. The above figure illustrates an economy in equilibrium at point a, where income and aggregate expenditures are both $4,500. a. Illustrate on the figure and explain the effect of an increase in consumer spending of $250, assuming the MPS is 0.5. b. Starting again from the original equilibrium, illustrate and explain the effect of a widening trade deficit