Consider a simple macro model with a constant price level and demand-determined output.The equations of the model are: C = 120 + 0.86Y,I = 300,G = 520,T = 0,X = 180,IM = 0.12Y.If national income is 2400,then desired aggregate expenditure is
A)1120.
B)1776.
C)2896.
D)3184.
E)3472.

Question

Quizplus · Accepted Answer

Desired aggregate expenditure (AE) is calculated as AE = C + I + G + (X - IM). Substituting the given values and Y = 2400, we get C = 120 + 0.86(2400) = 2184, IM = 0.12(2400) = 288. Therefore, AE = 2184 + 300 + 520 + (180 - 288) = 2896.

Consider a Simple Macro Model with a Constant Price Level