Question

Use the following information to complete the calculations.

C=14131 +0.71Y
I= 10081
G=3425
NX = -703
What is the value of autonomous expenditure (AE)? Round your answer to the nearest dollar.
AE: $
Calculate the equilibrium level of GDP. Round your answer to the nearest dollar.
GDP: $

Answer 1

The value of autonomous expenditure (AE) is $27634. The equilibrium level of GDP is $95,325.

Step-by-step explanation:

To find the value of autonomous expenditure (AE), we can use the equation AE = C + I + G + NX, where C is consumption, I is investment, G is government spending, and NX is net exports. Using the provided information:

C = 14131 + 0.71Y

I = 10081

G = 3425

NX = -703

Substituting the values into the equation:

AE = (14131 + 0.71Y) + 10081 + 3425 - 703

Simplifying:

AE = 27634 + 0.71Y

Rounding to the nearest dollar, AE is $27634 + 0.71Y.

To calculate the equilibrium level of GDP, we can set AE equal to Y, since in equilibrium, aggregate expenditure equals GDP. So, we have:

Y = AE = 27634 + 0.71Y

Simplifying and solving for Y:

0.29Y = 27634

Y = 27634 / 0.29

Rounding to the nearest dollar, GDP is $95,325.