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Exhibit: Aggregate Expenditures and Real GDP 2
-(Exhibit: Aggregate Expenditures and Real GDP 2) Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, IP = Planned Investment. Consider a simple economy where AE = C + IP, IP is autonomous and the consumption function is given by C = $1,000 billion + 0.75Y. What is the value of consumption when real GDP is $6,000 billion?
A) $1,000 billion
B) $2,500 billion
C) $4,500 billion
D) $5,500 billion
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