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Economics (MindTap Course List)

13th Edition
Roger A. Arnold
ISBN: 9781337617383

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BuyFindarrow_forward

Economics (MindTap Course List)

13th Edition
Roger A. Arnold
ISBN: 9781337617383
Textbook Problem

In the accompanying figure, explain what happens if

  1. a. The economy is at Q1
  2. b. The economy is at Q2

(a)

To determine

The economy at Q1.

Explanation

The expenditures are of three types in the closed economy, namely the consumption expenditure, investment expenditure and the government purchases. These three expenditures in the economy are the expenditures that constitutes the total expenditure of the economy. Thus, the total Expenditure is the Vertical summation of these three different expenditures of the economy. The TE of the economy is given as follows:

The economy is at its equilibrium when the TE curve is at point A where the TE and the TP are intersecting with each other...

(b)

To determine

The economy at Q2.

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