The following graph shows the total expenditure line (TE) for an economy where current equilibrium output is $350 billion and potential output is $600 billion.The economy is experiencing _________ (a contractionary gap, an inflationary gap) equal to $______ billion. To close the output gap, government purchases could _______ (increase, decrease) by _____ ($50, 150, 75) billion. Thus, the value of the multiplier for this economy is ___________ (0.7143, 0.5833, 0.4167, 1.6667, 0.6). The following graph shows the total expenditure line (TE) for an economy where current equilibrium output is $350 billion and potential outputis $600 billion.70045-degree line600TE500TE400300200100Potential GDP100200300400500600700REAL GDP (Billions of dollars)The economy is experiencingv equal tobillion. To close the output gap, government purchasescouldv bybillion. Thus, the value of the multiplier for this economy isOn the previous graph, shift the TE line to show the change in total expenditure necessary to close the output gap.Note: Select and drag the curve to the desired position. The curve will snap into position, so if you try to move a curve and it snaps back to itsoriginal position, just drag it a little farther.REAL EXPENDITURE (Billions of dollars)

Real GDP (350) is less than potential GDP (600), so there is a contractionary gap. To close the gap,…

Answered: The following graph shows the total…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The following graph shows the total expenditure line (TE) for an economy where current equilibrium output is $350 billion and potential output is $600 billion.

The economy is experiencing _________ (a contractionary gap, an inflationary gap) equal to $______ billion. To close the output gap, government purchases could _______ (increase, decrease) by _____ ($50, 150, 75) billion. Thus, the value of the multiplier for this economy is ___________ (0.7143, 0.5833, 0.4167, 1.6667, 0.6).

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