Question

Determine aggregate expenditures (AE) in this economy when real GDP (Y) is equal to $1,500 billion, $2,000 billion, and $2,500 billion.
When Y = $1,500 billion, AE =
billion.
When Y = $2,000 billion, AE =
billion
When Y = $2.500 billion, AE =
billion.

Answer 1

Answer:

a) When Y = $1,500 billion, AE =$1050 billion

b)When Y = $2,000 billion, AE = $1400 billion

c) When Y = $2.500 billion, AE =$1750 billion

Explanation:

As we know,

Yd = Y- T

Y = national income (or GDP)

T = Tax Revenues = 0.3Y

a) When Y = $1,500 billion, AE = $1,500 -0.3*$1,500 = $1050 billion

b) When Y = $2,000 billion, AE =$2,000 - 0.3*$2,000 = $1400 billion

c) When Y = $2.500 billion, AE = $2.500 - 0.3 * $2.500 = $1750 billion

Answer 2

Assuming the economy to operate in equilibrium, the aggregate expenditure model explains that GDP is equal to the Aggregate expenditure. Therefore, the solutions are:

• Y = $1,500 billion, AE = $1,500 billion.
• Y = $2,000 billion, AE = $2,000 billion.
• Y = $2,500 billion, AE = $2,500 billion.

What is the aggregate expenditure model?

The aggregate expenditure model explains the relationship between GDP and planned spending. The model states that:

$\rm GDP = Planned \:spendings$

Therefore the Aggregate expenditure for the real GPDs is:

• Y = $1,500 billion, AE = $1,500 billion.
• Y = $2,000 billion, AE = $2,000 billion.
• Y = $2,500 billion, AE = $2,500 billion.

Learn more about the aggregate expenditure model here:

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