On the following graph illustrate the impact of a sudden decline in consumer confidence that reduces autonomous consumption by $50 billion. Assume MPC = 0.8. (a) What is the new equilibrium level of real output? (Don't forget the multiplier.) (b) How large is the real GDP gap? (c) What has happened to average prices?

On the following graph illustrate the impact of a sudden decline in consumer confidence that reduces autonomous consumption by $50 billion. Assume MPC = 0.8. (a) What is the new equilibrium level of real output? (Don't forget the multiplier.) (b) How large is the real GDP gap? (c) What has happened to average prices?

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter9: Aggregate Demand

Section: Chapter Questions

Problem 5.12P

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