Consider the graphical representation of the Keynesian cross for a hypothetical country, where the planned aggregate spending line is graphed against the 45° line. Suppose that, in this country, there is an autonomous increase in aggregate spending of $20 billion. Show this change on the graph. 200 180 160 45 degree line 140 120 Planned AE 100 80 60 40 20 0 20 40 60 80 100 120 140 160 180 200 Real GDP (billions of dollars) What is the initial unplanned inventory investment? If the number is negative, be sure to include a negative sign initial unplanned inventory investment: $ billion After firms adjust their production, what is the total change in real GDP? If the number is negative, be sure to include a negative sign. total change in real GDP: $ billion Planned aggregate spending (billions of dollars)
Consider the graphical representation of the Keynesian cross for a hypothetical country, where the planned aggregate spending line is graphed against the 45° line. Suppose that, in this country, there is an autonomous increase in aggregate spending of $20 billion. Show this change on the graph. 200 180 160 45 degree line 140 120 Planned AE 100 80 60 40 20 0 20 40 60 80 100 120 140 160 180 200 Real GDP (billions of dollars) What is the initial unplanned inventory investment? If the number is negative, be sure to include a negative sign initial unplanned inventory investment: $ billion After firms adjust their production, what is the total change in real GDP? If the number is negative, be sure to include a negative sign. total change in real GDP: $ billion Planned aggregate spending (billions of dollars)
Chapter11: Fiscal Policy
Section: Chapter Questions
Problem 16E
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Transcribed Image Text:Consider the graphical representation of the Keynesian cross for a hypothetical country, where the planned aggregate
spending line is graphed against the 45° line. Suppose that, in this country, there is an autonomous increase in aggregate
spending of $20 billion. Show this change on the graph.
200
180
160
45 degree line
140
120
Planned AE
100
80
60
40
20
0
20
40
60
80
100
120
140
160
180
200
Real GDP (billions of dollars)
What is the initial unplanned inventory investment? If the number is negative, be sure to include a negative sign
initial unplanned inventory investment: $
billion
After firms adjust their production, what is the total change in real GDP? If the number is negative, be sure to include a
negative sign.
total change in real GDP: $
billion
Planned aggregate spending (billions of dollars)
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