Question

pls help, I am begging

Where A is autonomous consumption, A = 900 - P. And the planned Aggregate Expenditure function is AEp = 900 - 5P + .8(Yd) + 200.

1. Let's consider the same Keynesian economy we discussed last week. That is, let A = 900 – 5P, MPC = 0.8 and Ip = 200. Prices are perfectly sticky at P= 80. This represents an equilibrium (as in chapter 11) where there is no government and no trade, so that G=T= TR =t=EX =IM=0. Feel free to look at the answer key for last week's problem, to give you an easy starting point. a. Using the equilibrium condition in the Keynesian Cross, and leaving P as a variable (rather than as a specific number like 100 or 80), but plugging in all other relevant values (for example MPC, Ip), state equilibrium output as a function of the price level. That is, derive this economy's AD curve! You should get a down-sloping relationship between rGDP and P. b. Suppose that equilibrium output falls by $500. The only autonomous variable that changed is Ip. By how much did Ip fall?

Answer 1

(1) Ginen, AEp = 900-50 +0.8 YO+ Ip T=0 (since there is no government) we know, Yo = YT - Y = 4-0 (a) Ip= 200 At Equilibrium, y = AEp

[Ip = 200] [Yo=y] > y = 900- 5p + 0.8 Yo + Ip => y = 900 - 5p +0.890 + 200 - y = goo-5p +0.87+200 = 0.2y = 1100-5p => y = 1100 - SP 0.2 & ly = 5500-25p/ Aggregate Demand At Equilibrium, y= AER y = goo-s8+0.89 + Ip = 0.24 = goo-sp + Ip differentiate both side Now woret Ip weget, 0.2 dy – 0-0 + 1 dip -> 0:2 dy = d Ip - d Ip - o.ady => d Ip = 0·2x(+500) - d Ip = -100 Gruwen dy = -500 I i.e Equilibrium 7 output falls bytsoo]

I inuestment falls Hence by $100. Autonomous