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Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364

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BuyFindarrow_forward

Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364
Textbook Problem

Is the equilibrium in a Keynesian cross diagram usually expected to be at or near potential GDP?

To determine

To state: whether the expectation from the equilibrium in a Keynesian cross diagram to be at or near potential GDP.

Explanation

The aggregate expenditure function C+I+G+(XM) reaches the equilibrium when this line crosses the 45 degree line of slope in the diagram. This cross through the lines is the situation where the output and the aggregate expenditure are being equal

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