(Shifts of Aggregate Demand) Assume the simple spending multiplier equals 3. Determine the size and direction of any changes of aggregate expenditure line, real GDP demanded, and the aggregate demand curve for each of the following changes in spending: a. Spending rises by $8 billion at each income level. b. Spending falls by $5 billion at each income level. c. Spending rises by $20 billion at each income level.

(Shifts of Aggregate Demand) Assume the simple spending multiplier equals 3. Determine the size and direction of any changes of aggregate expenditure line, real GDP demanded, and the aggregate demand curve for each of the following changes in spending: a. Spending rises by $8 billion at each income level. b. Spending falls by $5 billion at each income level. c. Spending rises by $20 billion at each income level.

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter24: The Aggregate Demand/aggregate Supply Model

Section: Chapter Questions

Problem 42CTQ: On a microeconomic demand curve, a decrease in price causes an increase in quantity demanded because...

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#32 The aggregate-demand curve shows that a decrease in the price level a increases the real value of goods and services demanded in the economy. b increases the dollar value of goods and services demanded in the economy. c decreases the real value of goods and services demanded in the economy. d decreases the dollar value of goods and services demanded in the economy.
7 Suppose that the government increases its expenditure on goods and services by $100 billion and pays for these goods and services by raising autonomous taxes by $100 billion. What is the effect on aggregate demand and real GDP of each change individually and of the two combined