Answer the Following Questions Using the Aggregate Expenditures Model of the Economy

question 43

Essay

Answer the following questions using the aggregate expenditures model of the economy described below.C = 90 + .7Yd
T = 50 + .2Y
Ia = 36
Ga = 45
Xa = 62
M = .16Y
(a) What are the marginal propensity to consume, the marginal tax rate, and the marginal propensity to import?
(b) What is the saving function? What is the marginal propensity to save?
(c) What is the aggregate expenditure function? What is autonomous expenditure? What is the marginal propensity to withdraw?
(d) What is the equilibrium level of real GDP?
(e) What is the size of the multiplier?
(f) Suppose the full employment level of real GDP is $350.Does a recessionary gap or an inflationary gap exist? How can the government eliminate the gap by altering government expenditures?

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Definitions:

Free Flow Of Workers

Refers to the unrestricted movement of labor across industries, geographies, or organizations, aiming to optimize employment and skill utilization.

Political Integration

The process of combining different political entities, often sovereign states, into a single political unit or organization to achieve greater stability and governance.

Common Currency

A currency that is used by multiple countries, facilitating trade and economic policy coordination.

Foreign Subsidiary

A company that is based in one country but is owned or controlled by a parent company from another country.