Suppose there is some hypothetical economy in which households spend $0.50 of each additional dollar they earn and save the $0.50 they have left over. The following graph plots the economy's initial aggregate demand curve (AD₁). Suppose now that the government increases its purchases by $3.5 billion. Use the green line (triangle symbol) on the following graph to show the aggregate demand curve (AD₂) after the multiplier effect takes place. Hint: Be sure the new aggregate demand curve (AD2) is parallel to AD₁. You can see the slope of AD, by selecting it on the following graph. (?) PRICE LEVEL 116 114 112 110 108 106 104 102 + 100 AD₁ 100 102 104 106 108 110 OUTPUT (Billions of dollars) 112 114 116 κάπου Δήμου AD2 AD3 he following graph plots equilibrium in the money market at an interest rate of 6% and a quantity of money equal to $60 billion.
Suppose there is some hypothetical economy in which households spend $0.50 of each additional dollar they earn and save the $0.50 they have left over. The following graph plots the economy's initial aggregate demand curve (AD₁). Suppose now that the government increases its purchases by $3.5 billion. Use the green line (triangle symbol) on the following graph to show the aggregate demand curve (AD₂) after the multiplier effect takes place. Hint: Be sure the new aggregate demand curve (AD2) is parallel to AD₁. You can see the slope of AD, by selecting it on the following graph. (?) PRICE LEVEL 116 114 112 110 108 106 104 102 + 100 AD₁ 100 102 104 106 108 110 OUTPUT (Billions of dollars) 112 114 116 κάπου Δήμου AD2 AD3 he following graph plots equilibrium in the money market at an interest rate of 6% and a quantity of money equal to $60 billion.
Chapter19: The Keynesian Model In Action
Section: Chapter Questions
Problem 5SQP
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