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

question 2

Essay

Answer the following questions using the aggregate expenditures model of the economy described below.
C = 100 + .8Y_d
T = 60 + .25Y
I_a = 28
G_a = 48
X_a = 54
M = .1Y
(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 $380.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:

Arbitrage Opportunities

Arbitrage Opportunities arise when a financial instrument, or combination of instruments, can be bought and sold simultaneously in different markets for a risk-free profit due to price discrepancies.

Factor Betas

Measures of a security's sensitivity to various risk factors, indicating how much the security's returns are expected to change with those factors.

Multifactor APT

A model that describes the expected return on a security based on its exposure to multiple risk factors and the risk premia associated with those factors.

Macro Factors

Macro Factors are large-scale, national, or international elements or forces that affect the economy or the financial markets, such as inflation, unemployment, and fiscal policy.