Consider a hypothetical closed economy in which households spend $0.70 of each additional dollar they earn and save the remaining $0.30. The marginal propensity to consume (MPC) for this economy is0.7 , and the oversimplified multiplier for this economy is3.3333 . Suppose the government in this economy decides to increase government purchases by $300 billion. The increase in government purchases will lead to an increase in income, generating an initial change in consumption equal to$210 billion . This increases income yet again, causing a second change in consumption equal to$147 billion . The total change in demand resulting from the initial change in government spending is$1 trillion . The following graph shows the aggregate demand curve (AD1) for this economy before the change in government spending.Use the green line (triangle symbol) to plot the new aggregate demand curve (AD2) after the multiplier effect takes place. For simplicity, assume that there is no “crowding out.” I need help with the graphing part Hint: Be sure that the new aggregate demand curve (AD2) is parallel to the initial aggregate demand curve (AD1). You can see the slope of AD1 by selecting it on the graph. Consider a hypothetical closed economy in which households spend $0.70 of each additional dollar they earn and save the remaining $0.30.The marginal propensity to consume (MPC) for this economy is_ 0.7and the oversimplified multiplier for this economyis 3.3333Suppose the government in this economy decides to increase government purchases by $300 billion. The increase in government purchases. This increases income yet again,will lead to an increase in income, generating an initial change in consumption equal to $210 billioncausing a second change in consumption equal to $147 billion v . The total change in demand resulting from the initial change ingovernment spending is $1 trillionThe following graph shows the aggregate demand curve (AD1) for this economy before the change in government spending.Use the green line (triangle symbol) to plot the new aggregate demand curve (AD2) after the multiplier effect takes place. For simplicity,assume that there is no "crowding out."Hint: Be sure that the new aggregate demand curve (AD2) is parallel to the initial aggregate demand curve (AD1). You can see the slope ofAD, by selecting it on the graph.150A145140AD213513012512011511010510024710REAL GDP (Trillions of dollars)PRICE LEVEL

Question

Consider a hypothetical closed economy in which households spend $0.70 of each additional dollar they earn and save the remaining $0.30. The marginal propensity to consume (MPC) for this economy is0.7   , and the oversimplified multiplier for this economy is3.3333   .  Suppose the government in this economy decides to increase government purchases by $300 billion. The increase in government purchases will lead to an increase in income, generating an initial change in consumption equal to$210 billion   . This increases income yet again, causing a second change in consumption equal to$147 billion   . The total change in demand resulting from the initial change in government spending is$1 trillion   . The following graph shows the aggregate demand curve (AD1) for this economy before the change in government spending.Use the green line (triangle symbol) to plot the new aggregate demand curve (AD2) after the multiplier effect takes place. For simplicity, assume that there is no “crowding out.” I need help with the graphing part Hint: Be sure that the new aggregate demand curve (AD2) is parallel to the initial aggregate demand curve (AD1). You can see the slope of AD1 by selecting it on the graph. Consider a hypothetical closed economy in which households spend $0.70 of each additional dollar they earn and save the remaining $0.30.The marginal propensity to consume (MPC) for this economy is_ 0.7and the oversimplified multiplier for this economyis 3.3333Suppose the government in this economy decides to increase government purchases by $300 billion. The increase in government purchases. This increases income yet again,will lead to an increase in income, generating an initial change in consumption equal to $210 billioncausing a second change in consumption equal to $147 billion v . The total change in demand resulting from the initial change ingovernment spending is $1 trillionThe following graph shows the aggregate demand curve (AD1) for this economy before the change in government spending.Use the green line (triangle symbol) to plot the new aggregate demand curve (AD2) after the multiplier effect takes place. For simplicity,assume that there is no &#34;crowding out.&#34;Hint: Be sure that the new aggregate demand curve (AD2) is parallel to the initial aggregate demand curve (AD1). You can see the slope ofAD, by selecting it on the graph.150A145140AD213513012512011511010510024710REAL GDP (Trillions of dollars)PRICE LEVEL

Accepted Answer

The overall demand for all services and goods in an economy is known as "aggregate demand". Consumer…