7. Deriving and exploring the total expenditures curve The following graph shows total production (TP) and the level of Natural Real GDP (NRGDP) for a hypothetical economy. When Real GDP is $450 billion, consumption is $375 billion, government purchases are $30 billion, and investment is $70 billion. When Real GDP is $500 billion, consumption is $400 billion, government purchases are $30 billion, and investment is $70 billion. Use the blue line (circle symbol) to plot the economy's total expenditure function within a simplified Keynesian framework. 600 NRGDP Do graph. You need two coordinates. This is how TE would look like if you put it on the graph. 575 TOTAL EXPENDITURE (Billions of dollars) 450 475 500 525 50 550 425 400 TP 400 425 450 475 500 525 550 575 600 REAL GDP (Billions of dollars) TE This dot needs the (, ) This dot needs the (, ) $450 billion, $500 billion, $475 billion, an inflationary gap, Say's paradox, or a The economy is in equilibrium when Real GDP is or $525 billion At this point, the economy is also in recessionary gap. Which of the following did Keynes argue would be needed to move the economy to equilibrium at Natural Real GDP? Check all that apply. A decrease in government purchases A decrease in consumption An increase in investment An increase in government purchases
7. Deriving and exploring the total expenditures curve The following graph shows total production (TP) and the level of Natural Real GDP (NRGDP) for a hypothetical economy. When Real GDP is $450 billion, consumption is $375 billion, government purchases are $30 billion, and investment is $70 billion. When Real GDP is $500 billion, consumption is $400 billion, government purchases are $30 billion, and investment is $70 billion. Use the blue line (circle symbol) to plot the economy's total expenditure function within a simplified Keynesian framework. 600 NRGDP Do graph. You need two coordinates. This is how TE would look like if you put it on the graph. 575 TOTAL EXPENDITURE (Billions of dollars) 450 475 500 525 50 550 425 400 TP 400 425 450 475 500 525 550 575 600 REAL GDP (Billions of dollars) TE This dot needs the (, ) This dot needs the (, ) $450 billion, $500 billion, $475 billion, an inflationary gap, Say's paradox, or a The economy is in equilibrium when Real GDP is or $525 billion At this point, the economy is also in recessionary gap. Which of the following did Keynes argue would be needed to move the economy to equilibrium at Natural Real GDP? Check all that apply. A decrease in government purchases A decrease in consumption An increase in investment An increase in government purchases
Chapter1: Making Economics Decisions
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TOPIC: Deriving and exploring the total expenditures curve
Transcribed Image Text:7. Deriving and exploring the total expenditures curve
The following graph shows total production (TP) and the level of Natural Real GDP (NRGDP) for a hypothetical economy. When Real GDP is $450
billion, consumption is $375 billion, government purchases are $30 billion, and investment is $70 billion. When Real GDP is $500 billion, consumption
is $400 billion, government purchases are $30 billion, and investment is $70 billion.
Use the blue line (circle symbol) to plot the economy's total expenditure function within a simplified Keynesian framework.
600
NRGDP
Do graph.
You need two coordinates.
This is how TE would look like if you
put it on the graph.
575
TOTAL EXPENDITURE (Billions of dollars)
450
475
500
525
50
550
425
400
TP
400
425
450
475
500
525
550
575
600
REAL GDP (Billions of dollars)
TE
This dot
needs the
(, )
This dot
needs the
(, )
$450 billion,
$500 billion,
$475 billion,
an inflationary
gap, Say's
paradox, or a
The economy is in equilibrium when Real GDP is or $525 billion At this point, the economy is also in recessionary gap.
Which of the following did Keynes argue would be needed to move the economy to equilibrium at Natural Real GDP? Check all that apply.
A decrease in government purchases
A decrease in consumption
An increase in investment
An increase in government purchases
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