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Answer the following questions using the aggregate expenditures model of the economy described below. C = 90 + .7Yd, T = 50 + .2Y, Ia = 36, Ga = 45,...
Answer the following questions using the aggregate expenditures model of the economy described below.
C = 90 + .7Yd, T = 50 + .2Y, Ia = 36, Ga = 45, Xa = 62, and , M = .16Y
Required
(a) What is the saving function? What is the marginal propensity to save?
(b) What is the aggregate expenditure function? What is autonomous expenditure? What is the marginal propensity to withdraw?
(c) What is the equilibrium level of real GDP?
(d) What is the size of the multiplier?
(e) Suppose the full employment level of real GDP is $350. Does a recessionary gap or an inflationary gap exist? How can the government eliminate the gap by altering government expenditures?
