Question

In the country of Midland, autonomous consumption expenditure is $60 million, and the marginal propensity to consume is 0.6. Investment is $110 million, government expenditure is $70 million, and there are no income taxes. Investment and government expenditure are constant- they do not vary with income. The nation does not trade with the rest of the world. Instructions:

a) Draw the aggregate expenditure curve.

Answer 1

To draw the aggregate expenditure curve, you can use the equation AE = C + I + G + (X - M) and substitute the given values to plot the curve.

Step-by-step explanation:

The aggregate expenditure (AE) curve can be drawn using the given information. In the Keynesian cross model, the AE is the sum of consumption (C), investment (I), government expenditure (G), and net exports (X-M). The equation for AE can be written as AE = C + I + G + (X - M). Substituting the given values, the AE curve can be plotted.