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:

Sensorimotor Stage

The first stage in Piaget's theory of cognitive development, from birth to about 2 years of age, where infants learn about the world through their sensory impressions and motor activities.

Concrete Operational

A stage in Jean Piaget's theory of cognitive development during which children (ages 7-12 approximately) gain a better understanding of mental operations, leading to more logical thoughts about concrete events.

Formal Operational

The stage of cognitive development, according to Piaget, where individuals can think abstractly and systematically.

Assimilation

The cognitive process of fitting new information into pre-existing cognitive schemas, perceptions, and understanding.