AE Model: Graphing Macroeconomic Equilibrium

16. Deriving the Aggregate Expenditures Model / AE Model: Graphing Macroeconomic Equilibrium / Problem 10

Problem 10

Given a consumption function C = 4 + 0.7Y, and constant investment, government purchases, and net exports of 2 each, what is the equation for the aggregate expenditures line?

AE = 8 + 0.7Y

AE = 6 + 0.7Y

AE = 4 + 0.7Y

AE = 10 + 0.7Y