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What is the consumption function

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In an economy, autonomous consumption expenditure is $50 billion, investment is $200 billion, and government expenditure is $250 billion. The marginal propensity to consume is 0.7 and net taxes are $250 billion. Exports are $500 billion and imports are $450 billion. Assume that net taxes and imports are autonomous and the price level is fixed.

-What is the consumption function?

-What is the equation of the AE curve?

-Calculate equilibrium expenditure.

-Calculate the multiplier.

-If investment decreases to $150 billion, what is the change in equilibrium expenditure?

-Describe the process in part (e) that moves the economy to its new equilibrium expenditure

Reference no: EM132606569

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