Question

Assume at a GDP of $17,500, AE is 16,500. At a GDP of 14,000 AE is...

Assume at a GDP of $17,500, AE is 16,500. At a GDP of 14,000 AE is $15,000. What would AE be at GDP of 28,000?

Homework Answers

Answer #1

Sol:

Aggregate expenditure (AE) is the sum of all the expenditure undertaken in the economy by the factors during a specific time period.

Let’s assume that there is a linear relationship between GDP and AE, then through extrapolation we can determine the AE.

Linear relationship Slope = GDP change / AE change

Linear relationship Slope = (17,500 - 14,000) / (16,500 - 15,000)

Linear relationship Slope = 3500 / 1500 = 7/3

Taking a general point (A, G), one of the points (16,500, 17,500) and slope 7/ 3

Linear relationship Slope = GDP change / AE change

7/3 = (G - 17,500)/ (A - 16,500)

3 (G - 17,500) = 7 (A - 16,500)

3G - 52,500 = 7A - 115,500

3G = 7A - 63,000

G = 7/3 A - 21,000

Now

When G = 28,000

28,000 = 7/3 A - 21,000

7/3 A = 49,000

A = 49,000 x 3/ 7

A = 21,000

Therefore at GDP of 28,000, AE would be 21000.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Assume at a GDP of $17,500, AE is 16,500. At a GDP of 14,000 AE is...
Assume at a GDP of $17,500, AE is 16,500. At a GDP of 14,000 AE is $15,000. What would AE be at GDP of 26,000?
Assume a project has earnings before depreciation and taxes of $15,000, depreciation of $25,000, and that...
Assume a project has earnings before depreciation and taxes of $15,000, depreciation of $25,000, and that the firm has a 25% tax bracket. What are the after-tax cash flows for the project? Seleccione una: a. $15,000 b. $17,500 c. $28,000 d. $17,000 e. ($21,000) f. $19,000 g. $18,000 h. Can't be determined
GDP and WELL-BEING The following questions pertain to the U.S.' GDP. 1. What does GDP measure?...
GDP and WELL-BEING The following questions pertain to the U.S.' GDP. 1. What does GDP measure? 2. How well does GDP measure the well-being of a society? 3. Assume you were assigned the responsibly for establishing a new metric to modify GDP so that it encompass production and the well-being of a society. Discuss the additions you would make to GDP and why.
Assume the the real GDP for 2018 was $18 Trillion and that for 2019 it was...
Assume the the real GDP for 2018 was $18 Trillion and that for 2019 it was $20 Trillion. What was the rate of growth between 2018 and 2019? Show how you arrived at your answer. Assume you purchase $1000 worth of stock and the broker's fee is $100. Explain why your $1000 stock purchase is not included in GDP but the $100 broker's fee is included.
5. Using fiscal policy to avoid the recession of 2009. GDP in 2009 was roughly $15,000...
5. Using fiscal policy to avoid the recession of 2009. GDP in 2009 was roughly $15,000 billion ($15tr). GDP fell by approximately 3 percentage points in 2009. Throughout this question, assume that only consumption depends on Y. a. How many billion dollars is 3 percent of $15,000 billion? b. If the marginal propensity to consume were 0.5, by how much would government spending have to have increased to prevent a decrease in output? c. If the MPC were 0.5, by...
Assume that Canada is initially in long run equilibrium with price level of P1 and GDP...
Assume that Canada is initially in long run equilibrium with price level of P1 and GDP of Y1. Discuss how each of the following four events would affect aggregate demand, the price level and real GDP of Canada (no graphs needed). India reduces tariffs on goods imported from Canada
Answer with the abbreviation for the RL derivation rule (EI, EE, AI, AE, QN). What rule...
Answer with the abbreviation for the RL derivation rule (EI, EE, AI, AE, QN). What rule would allow you to derive Raa?(?x)Rxx
Using a SRAS, LRAS, AD model assume the following: full employment Real GDP is $18 trillion....
Using a SRAS, LRAS, AD model assume the following: full employment Real GDP is $18 trillion. At the present time, Real GDP is $18.3 trillion. The MPC is equal to .75. What kind of a gap exists and how large is that gap. If the government wanted to close that gap by changing G what kind of change and how much would the change in G have to be? If it wanted to close the gap by changing taxes, what...
Calculate GDP loss if equilibrium level of GDP is $8,000, unemployment rate 8.8%, and the MPC...
Calculate GDP loss if equilibrium level of GDP is $8,000, unemployment rate 8.8%, and the MPC is 0.80. Hint: (Use Okun's law to calculate GDP loss) a) How much money should the government spend to eliminate this GDP loss? b) Calculate the tax cut needed to eliminate this GDP loss. Assume that initially G is $300 and equilibrium real GDP is $5000. If the multiplier is 5, what would be the new equilibrium level of GDP if Government expenditures increase...
Assume the central bank decides to move and close the GDP gap instead of fiscal policy....
Assume the central bank decides to move and close the GDP gap instead of fiscal policy. In what direction will interest rates have to move to close the GDP gap and what type of open market operation will the central bank undertake? GDP gap (Recessionary and inflationery)
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT