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Fact 27.5.2
The economy of Tinseltown 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 27.5.2. What is the equation for the aggregate expenditure curve for this economy?
A)AE = 35 + 0.5Y
B)AE = 55 + 0.7Y
C)AE = 55 + 0.9Y
D)AE = 45 - 0.5Y
E)AE = 55 + 0.5Y

Question

Quizplus · Accepted Answer

The aggregate expenditure (AE) is calculated as AE = C + I + G + X - M. Substituting the given values: AE = (15 + 0.7Y) + 8 + 12 + 20 - 0.2Y = 55 + 0.5Y.

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