Use the information below to answer the following questions.
Fact 11.5.2
An economy has a consumption function of C = 15 + 0.7Y , investment equal to 8, government expenditure equal to 12, exports equal to 20, and an import function of M = 0.2Y.
-Refer to Fact 11.5.2.What is the equation for the aggregate expenditure curve for this economy?
A)AE = 55 + 0.9Y
B)AE = 55 + 0.5Y
C)AE = 35 + 0.5Y
D)AE = 55 + 0.7Y
E)AE = 45 - 0.5Y

Question

Quizplus · Accepted Answer

Aggregate expenditure (AE) is the sum of consumption (C), investment (I), government expenditure (G), exports (X), and imports (M), where imports are subtracted because they are an expenditure on foreign goods. Given C = 15 + 0.7Y, I = 8, G = 12, X = 20, and M = 0.2Y, AE = C + I + G + X - M = (15 + 0.7Y) + 8 + 12 + 20 - 0.2Y = 55 + 0.5Y.

Use the Information Below to Answer the Following Questions