Consider the following news headline....Canadian minister of defence announces $9million purchase of 65 new fighter jets. Assuming that aggregate out put is demand determined and that the f-35 jets are purchased domestically what will be the effect of this action, all other things equal, on the AE function and equilibrium national income?

To analyze the effect of the Canadian minister of defense's announcement on the aggregate expenditure (AE) function and equilibrium national income, we need to consider the components of aggregate expenditure and their relationships.

The AE function represents the total spending in an economy and is given by the formula AE = C + I + G + (X - M), where:
- C represents consumption expenditure
- I represents investment expenditure
- G represents government expenditure
- X represents exports
- M represents imports

In this case, the announcement relates to government expenditure (G) on purchasing new fighter jets. Since the jets are being purchased domestically, we can assume that this spending will be part of the domestic production (I.e., investment expenditure).

Therefore, the effect on the AE function is an increase in government expenditure (G), which leads to an increase in investment expenditure (I).

When investment expenditure increases, it directly affects the aggregate demand (AD) in the economy, which is closely linked to the national income. A higher AD leads to an increase in output and income in the economy.

In the short run, the increase in investment expenditure translates to an increase in aggregate demand, shifting the AE function upward. As a result, the equilibrium national income increases to a new level, where aggregate demand is equal to aggregate output.

It is important to note that this analysis assumes that all other factors affecting the economy, such as consumption, investment, and trade, remain constant. In reality, there may be other variables that influence the overall effect on the AE function and equilibrium national income.