What components of aggregate expenditure depend

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Question: Suppose Hegland economy is described by the following equations: C= 100 + 0.7*Yd Yd = .8*Y I = 56 X - M = 10 - 0.1*Y G = 50 You will use the Keynes model we discussed in class but we are assuming the economy is opened so now net export (X-M) is part of the aggregate expenditure (AE).

a. In the consumption function, what does 0.7 mean?

b. What components of aggregate expenditure depend on income?

c. Derive an algebraic expression for the aggregate expenditure (AE).

d. Solve for the equilibrium value of national income (Y=AE)

e. For each unit increase in national income, how much more is spent? f. (5 points) Calculate the (government expenditure) multiplier.

Reference no: EM133439546

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