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Fact 27.5.1
The economy of Beverly Hills has a consumption function of C = 10 + 0.8Y, investment equal to 6, government expenditure equal to 10, exports equal to 10, and an import function of M = 0.1Y.
-Refer to Fact 27.5.1. What is the equation for the aggregate expenditure curve for this economy?
A)AE = 16 + 0.7Y
B)AE = 36 - 0.7Y
C)AE = 26 + 0.8Y
D)AE = 36 + 0.9Y
E)AE = 36 + 0.7Y

Question

Quizplus · Accepted Answer

The equation for aggregate expenditure in this economy would be Y = AE, where AE = C + I + G + NX (Net Exports).
Using the given values:
C = 10 + 0.8Y
I = 6
G = 10
NX = X - M = 10 - 0.1Y
Substituting these values in the AE equation, we get:
AE = 10 + 0.8Y + 6 + 10 - 0.1Y
Simplifying, we get:
AE = 26 + 0.7Y
Therefore, the correct answer is E.

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