Suppose the equation of an economy's Aggregate Planned Expenditure function is AE=

Economics Dec 14, 2020

Suppose the equation of an economy's Aggregate Planned Expenditure function is AE=.75y+800. What is the value of the equilibrium level of real GDP (denoted Y*)?

Expert Solution

In this model, the equilibrium occurs where aggregate expenditures equal GDP.

Y=0.75Y+800

Y-0.75Y=800

0.25Y=800

Y=800/0.25=3200

So, the equilibrium level of GDP is 3200.

Archived Solution

Unlocked Solution

You have full access to this solution. To save a copy with all formatting and attachments, use the button below.

Already a member? Sign In

Important Note: This solution is from our archive and has been purchased by others. Submitting it as-is may trigger plagiarism detection. Use it for reference only.

For ready-to-submit work, please order a fresh solution below.

Or get 100% fresh solution

Get Custom Quote