In the Country of Midland, Autonomous Consumption Expenditure Is $60

question 348

Essay

In the country of Midland, autonomous consumption expenditure is $60 million, and the marginal propensity to consume is 0.6. Investment is $110 million, government expenditure is $70 million, and there are no income taxes. Investment and government expenditure are constant-they do not vary with income. The nation does not trade with the rest of the world.
a) Draw the aggregate expenditure curve.
b) What is the autonomous aggregate expenditure?
c) What is the size of the multiplier in Midland's economy?
d) What is aggregate planned expenditure and what is happening to inventories when real GDP is $800 million?
e) What is the economy's equilibrium aggregate expenditure?

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Definitions:

Socioeconomic Position

A person or group's rank within a societal hierarchy, often determined by factors such as income, education, and occupation.

Multiplicative

Pertaining to or involving multiplication, often relating to processes or effects that are increased exponentially.

Doctors Per Capita

is a measure indicating the number of medical doctors (physicians) available per thousand people in a given population.

High-Income Countries

Nations with very high levels of Gross Domestic Product (GDP) per capita, reflecting substantial economic prosperity and industrial development.