5. Expenditure GapsThe following graph shows the planned expenditure line (AE) for an economy where current equilibrium income is $350 billion and full-employmentincome is $100 billion.REAL EXPENDITURE (Billions of dollars)700600500400300200100Full-Employment Income00100200400500INCOME (Billions of dollars)300The economy is experiencingwould require a $45-degree linebillion600PE700PE?with the absolute value of the gap equal to $in government spending. Thus the value of the multiplier for this economy isbillion. Closing the income gapOn the graph, shift the PE line to show the change in the planned expenditure line necessary to close the income gap.

Aggregate demand refers to the total demand for goods and services in an economy at a given price…

5. Expenditure Gaps The following graph shows the planned expenditure line (AE) for an economy where current equilibrium income is $350 billion and full-employment income is $100 billion. REAL EXPENDITURE (Billions of dollars) 700 600 500 400 300 200 100 Full-Employment Income 0 0 100 500 200 400 INCOME (Billions of dollars) The economy is experiencing would require a $ 300 45-degree line billion 600 PE 700 PE billion. Closing the income gap with the absolute value of the gap equal to $ in government spending. Thus the value of the multiplier for this economy is On the graph, shift the PE line to show the change in the planned expenditure line necessary to close the income gap.

5. Expenditure Gaps The following graph shows the planned expenditure line (AE) for an economy where current equilibrium income is $350 billion and full-employment income is $100 billion. REAL EXPENDITURE (Billions of dollars) 700 600 500 400 300 200 100 Full-Employment Income 0 0 100 500 200 400 INCOME (Billions of dollars) The economy is experiencing would require a $ 300 45-degree line billion 600 PE 700 PE billion. Closing the income gap with the absolute value of the gap equal to $ in government spending. Thus the value of the multiplier for this economy is On the graph, shift the PE line to show the change in the planned expenditure line necessary to close the income gap.

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter16: The Influence Of Monetary And Fiscal Policy On Aggregate Demand

Section: Chapter Questions

Problem 11PA

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