6. Aggregate expenditure and income Suppose the following table shows consumption (C), investment (I), government purchases (G), and net exports (NX) in a hypothetical economy for various levels of real GDP. Assume that the price level remains unchanged at all levels of real GDP. Real GDP (Billions of dollars) с 1 G NX (Billions of dollars) (Billions of dollars) (Billions of dollars) (Billions of dollars) 500 250 250 200 -150 600 325 250 200 -150 700 400 250 200 -150 800 475 250 200 -150 900 550 250 200 -150 The following graph shows real GDP on the horizontal axis and aggregate expenditure on the vertical axis. Use the orange line (square symbol) to plot a 45-degree line on this graph. Then use the blue points (circle symbols) to plot the aggregate expenditure line for this economy. Note: Plot your points in the order in which you would like them connected. Line segments will connect the points automatically. AGGREGATE EXPENDITURES (Billions of dollars) 1000 900 800 700 600 500 400 400 500 600 700 800 REAL GDP (Billions of dollars) 900 1000 45-Degree Line AE Line + Equilibrium Output ? On the previous graph, use the black point (plus symbol) to indicate the equilibrium output at this price level. Note: Dashed drop lines will automatically extend to both axes. Suppose real GDP is currently $500 billion. Assuming that the price level remains constant, this would mean that , which would send a signal to firms to
6. Aggregate expenditure and income Suppose the following table shows consumption (C), investment (I), government purchases (G), and net exports (NX) in a hypothetical economy for various levels of real GDP. Assume that the price level remains unchanged at all levels of real GDP. Real GDP (Billions of dollars) с 1 G NX (Billions of dollars) (Billions of dollars) (Billions of dollars) (Billions of dollars) 500 250 250 200 -150 600 325 250 200 -150 700 400 250 200 -150 800 475 250 200 -150 900 550 250 200 -150 The following graph shows real GDP on the horizontal axis and aggregate expenditure on the vertical axis. Use the orange line (square symbol) to plot a 45-degree line on this graph. Then use the blue points (circle symbols) to plot the aggregate expenditure line for this economy. Note: Plot your points in the order in which you would like them connected. Line segments will connect the points automatically. AGGREGATE EXPENDITURES (Billions of dollars) 1000 900 800 700 600 500 400 400 500 600 700 800 REAL GDP (Billions of dollars) 900 1000 45-Degree Line AE Line + Equilibrium Output ? On the previous graph, use the black point (plus symbol) to indicate the equilibrium output at this price level. Note: Dashed drop lines will automatically extend to both axes. Suppose real GDP is currently $500 billion. Assuming that the price level remains constant, this would mean that , which would send a signal to firms to
Chapter1: Making Economics Decisions
Section: Chapter Questions
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Transcribed Image Text:6. Aggregate expenditure and income
Suppose the following table shows consumption (C), investment (I), government purchases (G), and net exports (NX) in a hypothetical economy for
various levels of real GDP. Assume that the price level remains unchanged at all levels of real GDP.
Real GDP
с
G
NX
(Billions of dollars) (Billions of dollars) (Billions of dollars) (Billions of dollars) (Billions of dollars)
500
250
250
200
-150
600
325
250
200
-150
700
400
250
200
-150
800
475
250
200
-150
900
550
250
200
-150
The following graph shows real GDP on the horizontal axis and aggregate expenditure on the vertical axis.
Use the orange line (square symbol) to plot a 45-degree line on this graph. Then use the blue points (circle symbols) to plot the aggregate
expenditure line for this economy.
Note: Plot your points in the order in which you would like them connected. Line segments will connect the points automatically.
AGGREGATE EXPENDITURES (Billions of dollars)
1000
900
800
700
600
500
400
400
500
600
700
800
900
1000
REAL GDP (Billions of dollars)
45-Degree Line
AE Line
+
Equilibrium Output
(?)
On the previous graph, use the black point (plus symbol) to indicate the equilibrium output at this price level.
Note: Dashed drop lines will automatically extend to both axes.
Suppose real GDP is currently $500 billion. Assuming that the price level remains constant, this would mean that
, which would send a signal to firms to
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