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Explain how an upsloping
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- Explain how an upsloping aggregate supply curve weakens the realized multiplier effect.The determinants of aggregate demand explain shifts in the aggregate demand curve. How does a change in investment spending affect aggregate demand? AsapA visual/graphic representation of how a decrease in consumer spending shifts the aggregate demand curve.
- Describe the phenomenon of the multiplier effect?Will an economy with a high multiplier be more stable or less stable than an economy with a low multiplier in response to changes in the economy or in government policy?Answer the following questions, which relate to the aggregate expenditures model:a. If Ca is $100, Ig is $50, Xn is -$10, and G is $30, what is the economy’s equilibrium GDP?b. If real GDP in an economy is currently $200, Ca is $100, Ig is $50, Xn is -$10, and G is $30, will the economy’s real GDP rise, fall, or stay the same?c. Suppose that full-employment (and full-capacity) output in an economy is $200. If Ca is $150, Ig is $50, Xn is -$10, and G is $30, what will be the macroeconomic result?
- Why does a reduction in aggregate demand reduce real output, rather than the price level? Why might a full-strength multiplier apply to a decrease in aggregate demand?Study the graph below. When will the multiplier be biggest? Price Level AD1 AS AD3 AD2 GDP Select one: a. When aggregate demand is at AD3 b. When aggregate demand is at AD2 c. When aggregate demand is at AD1 d. The multiplier will be the same size no matter what Aggregate Demand is ○ e. The multiplier will be one no matter what aggregate demand isIn a simple economy consumption is specified as C = 200 + 0.75 Yd. What is the multiplier for this economy? What is its saving function? Explain the components of the Aggregate demand function?
- The following graph depicts a macro equilibrium. Answer the questions based on the information in the graph (d) If the multiplier were equal to 4, how much additional investment would be needed to increase aggregate demand by the amount of the initial GDP gap?(e) Illustrate the changes in autonomous investment and induced consumption that occur in(d).(f) What happens to prices when aggregate demand increases by the amount of the initial GDP gap?Question #4 - Use the aggregate expenditures model to demonstrate the multiplier effect.Why can’t an economy with an MPC greater than 1 reach a stable equilibrium in the aggregate expenditure model?