Question #59601

Aggregate Expenditure Model:
AEo = 1,260.
c = 0.9
Determine Y.

Expert's answer

Aggregate Expenditure function is AE = AEo + c*Y + Io + Go + NXo.

In equilibrium AE = Y.

AEo = 1,260, c = 0.9.

As Io, Go and NXo are not provided, then:

Y = AEo + c*Y,

Y = 1,260 + 0.9Y,

0.1Y = 1,260,

Y = 12,600.

In equilibrium AE = Y.

AEo = 1,260, c = 0.9.

As Io, Go and NXo are not provided, then:

Y = AEo + c*Y,

Y = 1,260 + 0.9Y,

0.1Y = 1,260,

Y = 12,600.

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