Suppose there is some hypothetical economy in which households spend $0.50 of each additional dollar they earn and save the $0.50 they have left over. The following graph plots the economy's initial aggregate demand curve (ADI). Suppose now that the government increases its purchases by $3.5 billion. Use the green line (triangle symbol) on the following graph to show the aggregate demand curve (AD2) after the multiplier effect takes place. Hint: Be sure the new aggregate demand curve (AD₂) is parallel to AD₁. You can see the slope of AD₁ by selecting it on the following graph. ? PRICE LEVEL 116 114 112 110 108 106 104 102 9 100 100 102 104 105 108 110 112 114 118 OUTPUT (Billions of dollars) A AD₂ 4 AD₁ The following graph plots equilibrium in the money market at an interest rate of 1.5% and a quantity of money equal to $45 billion.

Suppose there is some hypothetical economy in which households spend $0.50 of each additional dollar they earn and save the $0.50 they have left over. The following graph plots the economy's initial aggregate demand curve (ADI). Suppose now that the government increases its purchases by $3.5 billion. Use the green line (triangle symbol) on the following graph to show the aggregate demand curve (AD2) after the multiplier effect takes place. Hint: Be sure the new aggregate demand curve (AD₂) is parallel to AD₁. You can see the slope of AD₁ by selecting it on the following graph. ? PRICE LEVEL 116 114 112 110 108 106 104 102 9 100 100 102 104 105 108 110 112 114 118 OUTPUT (Billions of dollars) A AD₂ 4 AD₁ The following graph plots equilibrium in the money market at an interest rate of 1.5% and a quantity of money equal to $45 billion.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Ab 27 Economics
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