Difficulty: Medium Figure 13-4
-Refer to Figure 13-4. Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, JI_P = Planned Investment. Suppose AE = C + I_P, and I_P is autonomous. What is the value of AE when Y = $12,000 billion?

Question

Difficulty: Medium Figure 13-4

-Refer to Figure 13-4. Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, JI_P = Planned Investment. Suppose AE = C + I_P, and I_P is autonomous. What is the value of AE when Y = $12,000 billion?

Quizplus · Accepted Answer

From the diagram, when Y = $12,000 billion, the value of C is $8,000 billion (given by the consumption line). Since I_P is autonomous, it remains constant regardless of the value of Y. Therefore, when Y = $12,000 billion, AE = C + I_P = $8,000 billion + I_P. We don't know the value of I_P, so we can't determine AE exactly. However, we know that AE must be greater than $8,000 billion, so the only option that satisfies this condition is B) $9,000 billion.