# Answer to Question #77246 in Macroeconomics for walhan

Question #77246

In an economy with no exports and imports, autonomous consumption is $3 trillion, the marginal propensity to consume

is 0.6, investment is $5 trillion, and government expenditure on goods and services is $6 trillion. Taxes are $5 trillion and

do not vary with real GDP.

If real GDP is $34.4 trillion, calculate disposable income, consumption expenditure, and aggregate planned expenditure. What is equilibrium expenditure?

Expert's answer

Ca = $3 trillion, c = 0.6, I = $5 trillion, G = $6 trillion, T = $5 trillion, real GDP = $34.4 trillion. Disposable income Yd = Y - T = 34.4 - 5 = $29.4 trillion.

Consumption expenditure C = Ca + c*Yd = 3 + 0.6*29.4 = $20.64 trillion.

Aggregate planned expenditure equals real GDP, so it is $34.4 trillion.

Equilibrium expenditure AE = C + I + G = 20.64 + 5 + 6 = $31.64 trillion.

Consumption expenditure C = Ca + c*Yd = 3 + 0.6*29.4 = $20.64 trillion.

Aggregate planned expenditure equals real GDP, so it is $34.4 trillion.

Equilibrium expenditure AE = C + I + G = 20.64 + 5 + 6 = $31.64 trillion.

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