The following graph shows total production (TP) and the level of Natural Real GDP (NRGDP) for a hypothetical economy. When Real GDP is $325 billion, consumption is $275 billion, government purchases are $50 billion, and investment is $25 billion. When Real GDP is $375 billion, consumption is $300 billion, government purchases are $50 billion, and investment is $25 billion. Use the blue fine (circle symbol) to plot the economy's total expenditure function within a simplified Keynesian framework. TOTAL EXPENDITURE (Billions of dollars) 500 475 450 425 400 375 350 325 NRGDP TE acer US 0 Oct 8 6:51 PRICE LEVEL AD1 130 AS 125 120 115 110 105 100 95 90 8.0 8.5 06 9.5 10.0 10.5 11.0 11.5 12.0 REAL GDP (Trillions of dollars) AD2 + New Eq Suppose consumers and businesses become more optimistic about future economic conditions, causing aggregate demand to increase by a total $0.5 trillion at each price level (after all multiplier effects have taken place). On the previous graph, use the green line (triangle symbol) to show the new aggregate demand curve (AD). Be sure that AD₂ is parallel to AD1 (you can mouse over AD₁ to see its slope). Then use the black drop lines (cross symbol) to indicate the new macroeconomic equilibrium after ST US acer Oct 8
The following graph shows total production (TP) and the level of Natural Real GDP (NRGDP) for a hypothetical economy. When Real GDP is $325 billion, consumption is $275 billion, government purchases are $50 billion, and investment is $25 billion. When Real GDP is $375 billion, consumption is $300 billion, government purchases are $50 billion, and investment is $25 billion. Use the blue fine (circle symbol) to plot the economy's total expenditure function within a simplified Keynesian framework. TOTAL EXPENDITURE (Billions of dollars) 500 475 450 425 400 375 350 325 NRGDP TE acer US 0 Oct 8 6:51 PRICE LEVEL AD1 130 AS 125 120 115 110 105 100 95 90 8.0 8.5 06 9.5 10.0 10.5 11.0 11.5 12.0 REAL GDP (Trillions of dollars) AD2 + New Eq Suppose consumers and businesses become more optimistic about future economic conditions, causing aggregate demand to increase by a total $0.5 trillion at each price level (after all multiplier effects have taken place). On the previous graph, use the green line (triangle symbol) to show the new aggregate demand curve (AD). Be sure that AD₂ is parallel to AD1 (you can mouse over AD₁ to see its slope). Then use the black drop lines (cross symbol) to indicate the new macroeconomic equilibrium after ST US acer Oct 8
Chapter9: The Keynesian Model In Action
Section: Chapter Questions
Problem 3SQ
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Transcribed Image Text:The following graph shows total production (TP) and the level of Natural Real GDP (NRGDP) for a hypothetical economy. When Real GDP is $325
billion, consumption is $275 billion, government purchases are $50 billion, and investment is $25 billion. When Real GDP is $375 billion, consumption
is $300 billion, government purchases are $50 billion, and investment is $25 billion.
Use the blue fine (circle symbol) to plot the economy's total expenditure function within a simplified Keynesian framework.
TOTAL EXPENDITURE (Billions of dollars)
500
475
450
425
400
375
350
325
NRGDP
TE
acer
US
0
Oct 8
6:51
Transcribed Image Text:PRICE LEVEL
AD1
130
AS
125
120
115
110
105
100
95
90
8.0
8.5
06
9.5
10.0
10.5
11.0
11.5
12.0
REAL GDP (Trillions of dollars)
AD2
+
New Eq
Suppose consumers and businesses become more optimistic about future economic conditions, causing aggregate demand to increase by a total $0.5
trillion at each price level (after all multiplier effects have taken place).
On the previous graph, use the green line (triangle symbol) to show the new aggregate demand curve (AD). Be sure that AD₂ is parallel to
AD1 (you can mouse over AD₁ to see its slope). Then use the black drop lines (cross symbol) to indicate the new macroeconomic equilibrium after
ST
US
acer
Oct 8
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