1. Calculate AE given the information below and completely fill in the table.

2. Where is equilibrium in this economy based on the table?

3. Using the injections-withdrawals approach complete the table and demonstrate that the point you chose in part 2 is the equilibrium.Go back to Chapter 8 if you forget how this is calculated.

4. Create another table and recalculate AE assuming that consumption has decreased at all levels by $25 (e.g. instead of consumption of 125 when total income is 95, consumption becomes 100).

5. Where is equilibrium in this economy now? (highlight the row)

6. Using the injections-withdrawals approach, complete the table again and demonstrate that the point you chose in question 4 is the equilibrium now.

7. If this economy had exports, explain the impact of the net export effect on fiscal policy, providing an example.

Taxes: $10 at each level of income

Investments: $15

Government Spending: $25

Injections-Withdrawals Approach

Injections-Withdrawals Approach