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Consider a goods market equilibrium (The aggregate expenditure model) in a closed economy a) Equationally and graphically (using the graph above) show (define) a goods market equilibrium b) Explain which factor changes the slope of the ZZ(or D, demand) curve and which factors shift the ZZ curve c) Suppose that marginal propensity to consume is equal to 0.8. Explain how much an increase in government spending 500 million of dollars raises real output and why output increases more than government spending?

Consider a goods market equilibrium (The aggregate expenditure model) in a closed economy a) Equationally and graphically (using the graph above) show (define) a goods market equilibrium b) Explain which factor changes the slope of the ZZ(or D, demand) curve and which factors shift the ZZ curve c) Suppose that marginal propensity to consume is equal to 0.8. Explain how much an increase in government spending 500 million of dollars raises real output and why output increases more than government spending?

ECON MACRO
ECON MACRO
5th Edition
ISBN:9781337000529
Author:William A. McEachern
Publisher:William A. McEachern
Chapter9: Aggregate Demand
Section: Chapter Questions
Problem 6.13P
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economics

Consider a goods market equilibrium (The aggregate expenditure model) in a closed economy

a) Equationally and graphically (using the graph above) show (define) a goods market equilibrium

b) Explain which factor changes the slope of the ZZ(or D, demand) curve and which factors shift the ZZ curve

c) Suppose that marginal propensity to consume is equal to 0.8. Explain how much an increase in government spending 500 million of dollars raises real output and why output increases more than government spending?

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