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Suppose the following table shows consumption (C), investment (I), government purchases (G), and net exports (NX) in a hypothetical economy for various levels of real GDP. Assume that the price level remains unchanged at all levels of real GDP. Real GDP C I G NX (Billions of dollars) (Billions of dollars) (Billions of dollars) (Billions of dollars) (Billions of dollars) 500 425 200 150 -50 600 450 200 150 -50 700 475 200 150 -50 800 500 200 150 -50 900 525 200 150 -50 The following graph shows real GDP on the horizontal axis and aggregate expenditure on the vertical axis.

Suppose the following table shows consumption (C), investment (I), government purchases (G), and net exports (NX) in a hypothetical economy for various levels of real GDP. Assume that the price level remains unchanged at all levels of real GDP. Real GDP C I G NX (Billions of dollars) (Billions of dollars) (Billions of dollars) (Billions of dollars) (Billions of dollars) 500 425 200 150 -50 600 450 200 150 -50 700 475 200 150 -50 800 500 200 150 -50 900 525 200 150 -50 The following graph shows real GDP on the horizontal axis and aggregate expenditure on the vertical axis.

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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### Aggregate Expenditure and Income #### Overview This lesson examines aggregate expenditure and income within the context of macroeconomics. We will use a hypothetical economy to illustrate the relationships between various economic components: consumption (C), investment (I), government purchases (G), and net exports (NX). #### Table Data Below is the data for consumption (C), investment (I), government purchases (G), and net exports (NX) at different levels of real GDP. It is assumed that the overall price level remains constant across all levels of real GDP. | Real GDP | C | I | G | NX | |---------------------|-----------------------|-----------------------|-----------------------|------------------------| | (Billions of dollars) | (Billions of dollars) | (Billions of dollars) | (Billions of dollars) | (Billions of dollars) | | 500 | 425 | 200 | 150 | -50 | | 600 | 450 | 200 | 150 | -50 | | 700 | 475 | 200 | 150 | -50 | | 800 | 500 | 200 | 150 | -50 | | 900 | 525 | 200 | 150 | -50 | #### Graph Instructions Following this table is a graph where: - The horizontal axis represents the real GDP. - The vertical axis represents the aggregate expenditure. Instructions: 1. Use the orange line (square symbol) to plot a 45-degree line on the graph. This line represents points where aggregate expenditure equals real GDP. 2. Use the blue points (circle symbols) to plot the actual aggregate expenditure line for this economy. This will visually demonstrate how aggregate expenditure and real GDP interact in this hypothetical economy. Follow these steps to deepen your understanding of macroeconomic relationships and their implications on policy and economic health.
Transcribed Image Text:### Aggregate Expenditure and Income #### Overview This lesson examines aggregate expenditure and income within the context of macroeconomics. We will use a hypothetical economy to illustrate the relationships between various economic components: consumption (C), investment (I), government purchases (G), and net exports (NX). #### Table Data Below is the data for consumption (C), investment (I), government purchases (G), and net exports (NX) at different levels of real GDP. It is assumed that the overall price level remains constant across all levels of real GDP. | Real GDP | C | I | G | NX | |---------------------|-----------------------|-----------------------|-----------------------|------------------------| | (Billions of dollars) | (Billions of dollars) | (Billions of dollars) | (Billions of dollars) | (Billions of dollars) | | 500 | 425 | 200 | 150 | -50 | | 600 | 450 | 200 | 150 | -50 | | 700 | 475 | 200 | 150 | -50 | | 800 | 500 | 200 | 150 | -50 | | 900 | 525 | 200 | 150 | -50 | #### Graph Instructions Following this table is a graph where: - The horizontal axis represents the real GDP. - The vertical axis represents the aggregate expenditure. Instructions: 1. Use the orange line (square symbol) to plot a 45-degree line on the graph. This line represents points where aggregate expenditure equals real GDP. 2. Use the blue points (circle symbols) to plot the actual aggregate expenditure line for this economy. This will visually demonstrate how aggregate expenditure and real GDP interact in this hypothetical economy. Follow these steps to deepen your understanding of macroeconomic relationships and their implications on policy and economic health.
**Graph Title: Aggregate Expenditures and Real GDP** **Graph Description:** This graph illustrates the relationship between Aggregate Expenditures and Real Gross Domestic Product (Real GDP) in billions of dollars. **X-Axis (Horizontal Axis):** - Label: REAL GDP (Billions of dollars) - Range: 400 to 1000 **Y-Axis (Vertical Axis):** - Label: AGGREGATE EXPENDITURES (Billions of dollars) - Range: 400 to 1000 **Graph Elements:** 1. **45-Degree Line:** - Represented by a solid orange line. - This line has a constant slope of 1, signifying that all points along it have equal values for Real GDP and Aggregate Expenditures. 2. **AE Line:** - Represented by a solid blue line with circular markers. - This line indicates the Aggregate Expenditures (AE) at various levels of Real GDP. 3. **Equilibrium Output:** - Represented by a black cross symbol. - This point marks the equilibrium output where aggregate expenditures equal real GDP. **Legend:** - The legend on the right side explains the symbols used in the graph: - Orange line with a square marker: 45-Degree Line - Blue line with a circular marker: AE Line - Black cross: Equilibrium Output
Transcribed Image Text:**Graph Title: Aggregate Expenditures and Real GDP** **Graph Description:** This graph illustrates the relationship between Aggregate Expenditures and Real Gross Domestic Product (Real GDP) in billions of dollars. **X-Axis (Horizontal Axis):** - Label: REAL GDP (Billions of dollars) - Range: 400 to 1000 **Y-Axis (Vertical Axis):** - Label: AGGREGATE EXPENDITURES (Billions of dollars) - Range: 400 to 1000 **Graph Elements:** 1. **45-Degree Line:** - Represented by a solid orange line. - This line has a constant slope of 1, signifying that all points along it have equal values for Real GDP and Aggregate Expenditures. 2. **AE Line:** - Represented by a solid blue line with circular markers. - This line indicates the Aggregate Expenditures (AE) at various levels of Real GDP. 3. **Equilibrium Output:** - Represented by a black cross symbol. - This point marks the equilibrium output where aggregate expenditures equal real GDP. **Legend:** - The legend on the right side explains the symbols used in the graph: - Orange line with a square marker: 45-Degree Line - Blue line with a circular marker: AE Line - Black cross: Equilibrium Output
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