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Explain the effect on aggregate expenditure

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Question: A simple Keynesian economy is described by the following set of equations: Consumption = 600 + 0.70Y Investment = 400 + 0.20Y Goverment Spending = 900 Exports =200 Imports = 100 + 0.10Y

Question 1 Calculate the multiplier in this economy. Explain the meaning of the multiplier effect.

Question 2 Find the equilibrium output in this economy.

Question 3. Government decides to increase its expenditure by AG=$100. What would be the resulting change in output? What would be the new output?

Question 4. Explain the effect on aggregate expenditure (AE) curve when the government increases its expenditure by AG=$100.

Question 5. The labour force is 200 million and the unemployment rate is 10 percent. Two million people quit looking for a job. What is the new unemployment rate?

Reference no: EM133630148

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