If planned aggregate expenditure in an economy can be written as:
PAE = 10,000 + 0.45Y,what is the short-run equilibrium level of output in this economy?

Question

Quizplus · Accepted Answer

In the short-run equilibrium, output is equal to planned aggregate expenditure, so we set PAE equal to Y:

PAE = Y 
10,000 + 0.45Y = Y 
0.55Y = 10,000 
Y = 18,181

Therefore, the short-run equilibrium level of output is $18,181, which is closest to answer B, 18,200.

If Planned Aggregate Expenditure in an Economy Can Be Written