nomınal weaıtn, and $r$ is the price ıevel. suppose that $\mathrm{NI}$ is constant and equal to $\$

Question

nomınal weaıtn, and $r$ is the price ıevel. suppose that $\mathrm{NI}$ is constant and equal to $\$<4, \mathrm{UuU}$.
a. In the table below compute the private sector's real wealth (M/P) and the intercept term of the AE function for each price level. (Round your responses to the nearest whole number.)
\begin{tabular}{ccc}
\hline Price Level & M/P & AE Function \
\hline 2 & 12000 & $\mathrm{AE}=4000+0.6 \mathrm{Y}$ \
3 & 8000 & $\mathrm{AE}=3000+0.6 \mathrm{Y}$ \
4 & 6000 & $\mathrm{AE}=2500+0.6 \mathrm{Y}$ \
5 & 4800 & $\mathrm{AE}=2200+0.6 \mathrm{Y}$ \
6 & 4000 & $\mathrm{AE}=2000+0.6 \mathrm{Y}$ \
\hline
\end{tabular}
b. 1.) Use the line drawing tool two times to draw and label the $A E$ functions that correspond to price levels 2 and 6.
2.) Use the point plotting tool to plot and label the equilibrium level of expenditures that correspond to price levels 2 and 6 .

Carefully follow the instructions above, and only draw the required objects. $\square$
It can be seen that a rise in domestic price level reduces private sector wealth, which leads to a fall in desired consumption, and thus a downward shift in the AE curve.
c. In the table below compute the level of equilibrium national income $(\mathrm{Y})$ for each of the values of P. For example, when $P=2, A E=4,000+0.6 Y$. Thus the equilibrium level of $Y$ is such that $\mathrm{Y}=4,000+0.6 \mathrm{Y}$, which implies $\mathrm{Y}=10,000$. (Round your responses to the nearest whole number.)
\begin{tabular}{ccc}
\hline Price Level & AE Function & \begin{tabular}{c} 
The level of \
equillibrium $\mathbf{Y}$
\end{tabular} \
\hline 2 & $\mathrm{AE}=4,000+0.6 \mathrm{Y}$ & 10,000 \
3 & $\mathrm{AE}=3,000+0.6 \mathrm{Y}$ & $\square$ \
4 & $\mathrm{AE}=2,500+0.6 \mathrm{Y}$ & $\square$ \
5 & $\mathrm{AE}=2,200+0.6 \mathrm{Y}$ & $\square$ \
6 & $\mathrm{AE}=2,000+0.6 \mathrm{Y}$ & $\square$ \
\hline
\end{tabular}

Aggregate Expenditure Function

Accepted Answer

∻Solution∻ ‖ a ⋮ To compute the private sector's real wealth (M/P) and the intercept term of the AE function for each price level, we use the given data. The formula for real wealth is $M/P$, where $M$ is the nominal wealth and $P$ is the price level. The intercept term of the AE function is given directly in the table. ‖ ‖ b ⋮ To draw and label the AE functions that correspond to price levels 2 and 6, we use the given AE functions: $AE_{p=2} = 4000 + 0.6Y$ and $AE_{p=6} = 2000 + 0.6Y$. These lines should be plotted on the graph with the x-axis representing Actual Nominal Income (Y) and the y-axis representing Desired Aggregate Expenditure (AE). ‖ ‖ c ⋮ To compute the level of equilibrium national income $(Y)$ for each of the values of P, we solve the equation $Y = AE$ for each AE function. For example, when $P=2$, $AE = 4000 + 0.6Y$. Setting $Y = AE$, we get $Y = 4000 + 0.6Y$. Solving for $Y$, we get $Y = 10,000$. We repeat this process for each price level. ‖ ∻Answer∻ ⚹ The private sector's real wealth and the intercept term of the AE function for each price level are computed as follows: - For $P=2$: Real wealth = 12000, AE function = $4000 + 0.6Y$ - For $P=3$: Real wealth = 8000, AE function = $3000 + 0.6Y$ - For $P=4$: Real wealth = 6000, AE function = $2500 + 0.6Y$ - For $P=5$: Real wealth = 4800, AE function = $2200 + 0.6Y$ - For $P=6$: Real wealth = 4000, AE function = $2000 + 0.6Y$ The equilibrium national income $(Y)$ for each price level is: - For $P=2$: $Y = 10,000$ - For $P=3$: $Y = 7,500$ - For $P=4$: $Y = 6,250$ - For $P=5$: $Y = 5,500$ - For $P=6$: $Y = 5,000$ ⚹ ∻Key Concept∻ ⚹ Real wealth and equilibrium national income ⚹ ∻Explanation∻ ⚹ Real wealth is calculated as nominal wealth divided by the price level. The equilibrium national income is found by setting the aggregate expenditure equal to national income and solving for $Y$. ⚹◊What impact does a rise in domestic price level have on desired consumption and the Aggregate Expenditure curve in macroeconomics?⍭ Generate me a similar question◊

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