The following graph shows the aggregate demand curve (AD1 ) for this economy before the change in government spending. On the following graph, use the green line (triangle symbol) to plot the new aggregate demand curve (AD2) after the multiplier effect takes place. For simplicity, assume that there is no "crowding out." Hint: Be sure that the new aggregate demand curve (AD2) is parallel to the initial aggregate demand curve (AD1 ). You can see the slope of ADI by selecting it on the graph. PRICE LEVEL 140 135 130 125 120 115 110 105 100 AD 6 2 3 REAL GDP (Trillions of dollars) AD2
The following graph shows the aggregate demand curve (AD1 ) for this economy before the change in government spending. On the following graph, use the green line (triangle symbol) to plot the new aggregate demand curve (AD2) after the multiplier effect takes place. For simplicity, assume that there is no "crowding out." Hint: Be sure that the new aggregate demand curve (AD2) is parallel to the initial aggregate demand curve (AD1 ). You can see the slope of ADI by selecting it on the graph. PRICE LEVEL 140 135 130 125 120 115 110 105 100 AD 6 2 3 REAL GDP (Trillions of dollars) AD2
Chapter11: Managing Aggregate Demand: Fiscal Policy
Section: Chapter Questions
Problem 2TY
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