30. Given this model, what would be the change in equilibrium level of income were G to increase to 250?
31. Given this model, what would be the new equi8librium level of income were Investment spending to decline by 50?
Aggregate demand is the sum of consumption, investment, government spending and net export.
This means,
AD = C + I + G + NX
NX = X - M
Where,
C is consumption
I is investment
G is government spending
NX is net export
X is export
M is import.
The short run equilibrium is where the AD curve intersects the SRAS curve.
Long run equilibrium is where the AD curve intersects the SRAS and LRAS curve at a point.
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