Final Exam
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Page 5 of 50
Question 5
๐ด๐ธ = ๐ถ + ๐(๐ โ ๐ก๐) + ๐ผ + ๐บ + ๐ โ ๐๐
โ ๐ด๐ธ = ๐ถ + ๐ผ + ๐บ + ๐ + [๐(1 โ ๐ก) โ ๐]๐
โ ๐ด๐ธ = ๐ด + ๐ง๐
Given the equilibrium condition (๐ = ๐ด + ๐ง๐), an initial exogenous increase in the autonomous expenditures of the size โ๐ด will initially increase Y by the same amount so that the initial change in Y is equal to โ๐ด: โ๐ = ๐0โฒ โ ๐0 = โ๐ด.
Derive the AE as a function of actual national income and interpret it and every parameter of it. The equilibrium equation is ๐ด๐ธ = ๐.
