Answer to Question #330335 in Macroeconomics for Isay

Question

Exercise 1.4 Output and income are in equilibrium when planned expenditures AE are equal to national income, Y, in other words, meaning Y = AE. (a) Suppose the AE function is AE = 165 + 0.8Y. Draw a diagram showing the aggregate expenditure function. (b) In your diagram draw the 45◦ line that shows all points at which national income and aggregate expenditures are equal (Y = AE) (c) Using your diagram, or a numerical example, or an algebraic solution, find equilibrium output and income in this example and show it in the diagram.

Answer 1

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