In the Economy of St

question 425

Essay

In the economy of St. Maynard Island, autonomous consumption expenditure is $185 million, and the marginal propensity to consume is 0.75. Investment is $150 million, government expenditure is $100 million, and net taxes are $80 million. Investment, government expenditure, and taxes are constant-they do not vary with income. The island does not trade with the rest of the world.
a) Draw the aggregate expenditure curve.
b) What is the island's autonomous aggregate expenditure?
c) What is the size of the multiplier in St. Maynard Island's economy?
d) What is the island's aggregate planned expenditure and what is happening to inventories when real GDP is $1,100 million?
e) What is the economy's equilibrium aggregate expenditure?

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Definitions:

Reinforcers

Stimuli, which when presented after a behavior, increase the likelihood of that behavior being repeated.

Pathological Triangular Relationship

A dysfunctional pattern of interaction involving three parties, where conflict between two is avoided by offloading it onto a third party.

Disengaged Family

A family unit where members have weak emotional bonds, leading to a lack of support and communication among them.

Enmeshed Family

A family system with overly close and intertwined relationships, where boundaries are blurred, and independence is discouraged.