M1 Desired Aggregate ExpenditureYo Y₂GYoY₂FIGURE 23-1Refer to Figure 23-1. Assume the economy is initially in equilibrium with desired aggregate expenditure equal to real GDP at point V. The price level is P 0Now, suppose the AE curve shifts to AE 1 and we move to a new equilibrium level of GDP at Y ₁ and point F on AD 1A possible cause of this change in equilibrium isO an exogenous rise in the price level.O an exogenous fall in the price level.O an increase in government purchases.O a decrease in desired net exports.O an increase in autonomous consumption.Y₁AE-YAF2AFOReal GDPAD2ADI ADOReal GDP

Equilibrium in the Keynesian cross model occurs at the intersection of 45 degree line and aggregate…

Desired Aggregate Expenditure Yo Y₂ G Yo V₂ FIGURE 23-1 Refer to Figure 23-1. Assume the economy is initially in equilibrium with desired aggregate expenditure equal to real GDP at point V. The price level is P 0 Now, suppose the AE curve shifts to AE 1 and we move to a new equilibrium level of GDP at Y 1 and point F on AD ¹. A possible cause of this change in equilibrium is O an exogenous rise in the price level. O an exogenous fall in the price level. O an increase in government purchases. O a decrease in desired net exports O an increase in autonomous consumption. Y₁ AE-Y AF2 AFO Real GDP AD2 ADI ADO Real GDP

Desired Aggregate Expenditure Yo Y₂ G Yo V₂ FIGURE 23-1 Refer to Figure 23-1. Assume the economy is initially in equilibrium with desired aggregate expenditure equal to real GDP at point V. The price level is P 0 Now, suppose the AE curve shifts to AE 1 and we move to a new equilibrium level of GDP at Y 1 and point F on AD ¹. A possible cause of this change in equilibrium is O an exogenous rise in the price level. O an exogenous fall in the price level. O an increase in government purchases. O a decrease in desired net exports O an increase in autonomous consumption. Y₁ AE-Y AF2 AFO Real GDP AD2 ADI ADO Real GDP

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter11: Managing Aggregate Demand: Fiscal Policy

Section: Chapter Questions

Problem 2TY

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