Question

An economy is described by the following equations: c = 2,600 + 0.8 (y ��� t) - 10,000r, ip = 2,000 - 10,000r, g = 1,800, nx = 0, t = 3,000. The real interest rate, expressed as a decimal, is 0.10 (that is, 10 percent). Find a numerical equation relating planned aggregate expenditure to output.

Answer 1

The equation relating planned aggregate expenditure to output is AE = 6600 + 0.95Y - 20000r.

Step-by-step explanation:

An equation relating planned aggregate expenditure to output:

In this economy, the aggregate expenditure (AE) function can be calculated using the equation AE = C + I + G + X - M. Substituting the given values for consumption (C), government spending (G), exports (X), imports (M), and other parameters, we obtain AE = C + I + G + X - M = 2600 + 0.8(Y - T) - 10000r + 2000 - 10000r + 1800 - 0 + 0.15Y - 3000. Simplifying this equation gives AE = 6600 + 0.95Y - 20000r.