Consider a Simple Aggregate Expenditure Model Where All Components of Aggregate

question 197

Multiple Choice

Consider a simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption. If the consumption function is JC = $500 + 0.8Y, planned investment = $200, government purchases = $300,
Jnet exports = $100, and real GDP = $1,000, what is the amount of induced expenditures?

• A) $500
• B) $800
• C) $1,100
• D) $1,900

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Definitions:

Equilibrium

A state in a market where the quantity demanded equals the quantity supplied, resulting in a stable market price.

Consumer Surplus

The difference between the total amount that consumers are willing and able to pay for a good or service and the total amount that they actually pay.

Excess Quantity

A situation where the supply of a product exceeds the demand for it.

Consumer Surplus

is the difference between the total amount that consumers are willing to pay for a good or service and the total amount that they actually pay.