In Macroland,planned aggregate expenditure equals 100,000 + 0.5Y.If autonomous government purchases increase by 5000,short-run equilibrium output will change from

Question

Quizplus · Accepted Answer

The equation for planned aggregate expenditure is given as:
Planned aggregate expenditure = 100,000 + 0.5Y
If autonomous government purchases increase by 5000, then the new equation for planned aggregate expenditure will be:
Planned aggregate expenditure = 100,000 + 0.5Y + 5000
= 105,000 + 0.5Y
In short-run equilibrium, planned aggregate expenditure is equal to output (Y).
Therefore, we can equate the above equation to output:
Y = 105,000 + 0.5Y
0.5Y = 105,000
Y = 210,000
Thus, short-run equilibrium output will change from 200,000 to 210,000. Therefore, the correct answer is D.

In Macroland,planned Aggregate Expenditure Equals 100,000 + 0