Assignment Example | Topics and Well Written Essays - 500 words - 208

Assignment ExampleThe equations of the model are C = 120 + 0.86Y, I = 300, G = 520, T = 0, X = 180, IM = 0.12Y. Total autonomous spending in this model is12) Consider the following news headline Business community gloomy intimately the economy-investment plans axed. Assuming that aggregate output is demand-determined, what effect bequeath this have, all other things equal, on the AE function and on equilibrium internal income?14) Consider a bare(a) macro model with a constant price level and demand-determined output. Suppose desired aggregate expenditures are less than the current level of national income. The erect distance between the AE curve and the 45-degree line representsGenerally, a decline in interest rates significantly boosts consumption, for this induces individuals to borrow from banks borrowings used for consumption expenditures. An increase in the interest rate, however, sends negative signals to the market, in effect, reducing borrowings used for consumption expe nditures.A brief look suggests that anticipated changes in income, which may entail tax changes, therefore impacts consumption in one way or the other. The precise effect, however, depends on whether the perceived changes are temporary or permanent. An anticipated cut on income will automatically reduce consumption expenditures. Increases in income will thus boost consumption. The challenge, therefore, depends on the specific expectations and contexts in which the increases or decreases are implemented.Each of the following headlines describes an caseful that will have an effect on desired aggregate expenditure. Which component (or sector) of AE would be affected? What will be the effect on equilibrium national income? ExplainThe component of aggregate expenditure that would be affected with the ministers pledge is the Consumption component. Basically, the announcement will leave workers with an increment in their