## Description

- Suppose you are given the following information for an economy without government spending, exports, or imports. C is desired consumption, I is desired investment, and Y is income. C and I are given by:

C = 1300 + 0.85Y

I = 450

- What is the equation for the aggregate expenditure (AE) function?
- Applying the equilibrium condition that Y = AE, determine the level of equilibrium national income.
- Using your answer from part (b), determine the values of consumption, saving, and investment when the economy is in equilibrium.
- Consider the simplest macro model with demand-determined output. The equations are:

*C* = 150 + 0.8*Yd*, *Yd = Y-T*,

*I* = 400, *G* = 700,

*T* = .2*Y*, *X* = 130, and

*IM* = 0.14*Y*.

- What is the Marginal Propensity to Consume (MPC) in this model?
- What is the Marginal Propensity to import?
- What is the total autonomous expenditure?
- What is the equilibrium GDP?