Using the graph show what happens to the aggregate expenditures curve (AE1) when

Using the graph show what happens to the aggregate expenditures curve (AE1) when autonomous expenditures fall (to AE2).
Y
AE1 Using the graph draw consumption curve C2 showing what happens to equilibrium income when the marginal propensity to consume (in C1) rises (to C2).
Y
C1The marginal propensity to consume is .7 and autonomous expenditure is 4000. What is the level of equilibrium income in the economy? Demonstrate graphically. Show all relevant labels.
YIf C = 20 + .7Y compute the multiplier (M).
Using the graph show what happens to the aggregate expenditures curve (AE1) when autonomous expenditures fall (to AE2).
Y
AE1 Using the graph draw consumption curve C2 showing what happens to equilibrium income when the marginal propensity to consume (in C1) rises (to C2).
Y
C1The marginal propensity to consume is .7 and autonomous expenditure is 4000. What is the level of equilibrium income in the economy? Demonstrate graphically. Show all relevant labels.
YIf C = 20 + .7Y compute the multiplier (M). Explain the economic meaning of the multiplier. Show all formulas and calculations
Name _________________________________
If C = 90 + .8Y; I = 20; and G = 10
What is the value of the marginal propensity to expend (MPE)? How do you know this?
What is the meaning of the MPE?
Write the full AE equation and
Draw the curve that represents AE. Be as precise and detailed as possible.
Y
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Consumption has two components: The autonomous part and the induced part (related to income). If C = 40 + .75Y
What is the value of the autonomous consumption?
What is the value of the induced consumption if Y = 100?
Based on the information on the graph below and the fact that Y = M x AE
If potential output (Y*) is 700 what is the amount of the recessionary gap? (10points)
Find the increase in autonomous spending needed to bring the economy to full potential Y by applying an expansionary fiscal policy (reducing taxes). Show all formulas terms and calculations.
Yrec Y* Yinf Y
AE = 300 + .5Y
600 700 800
Name _________________________________
What do we have to watch for when giving a tax reduction (to consumers) in order to increase autonomous spending to bridge the recessionary gap?
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