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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

What will happen to Real GDP if autonomous spending rises and the economy is operating in the horizontal section of the Keynesian AS curve? Explain your answer.

To determine

Changes in real GDP when the autonomous spending is increases.

Explanation

Autonomous spending is the spending that the economy makes when there is no income to the consumer. This means that the spending that is independent of the disposable income is known as the autonomous spending of the consumer. As the autonomous spending increases individually, it will result in the greater increase in the total spending of the economy.

The increase in the total spending leads to an increase in the demand for goods and services in the economy...

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