The graph in Figure I presents the annual GDP growth rate of the United States economy since the first quarter of 2004, while the graphs in Figure II represent three different scenarios of the relationship. between aggregate demand and supply that reflect different situations of economic growth. Answer the following questions in detail. Using the shifts in the aggregate demand curve in each of the three graphs in Figure II, explain the function of aggregate consumption and investment. Explain in detail what is happening in Graph A in Figure II and, after examining the data in the graph in Figure I, identify in what period of time said situation is occurring.

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The graph in Figure I presents the annual GDP growth rate of the United States economy since the first quarter of 2004, while the graphs in Figure II represent three different scenarios of the relationship. between aggregate demand and supply that reflect different situations of economic growth. Answer the following questions in detail.

Using the shifts in the aggregate demand curve in each of the three graphs in Figure II, explain the function of aggregate consumption and investment.

Explain in detail what is happening in Graph A in Figure II and, after examining the data in the graph in Figure I, identify in what period of time said situation is occurring.

Table 1.1.1. Percent Change from Preceding Period in Real Gross Domestic Product
[Percent] Seasonally adjusted at annual rates
https://apps.bea.gov/iTable/iTable.cfm?reqid=19&step=2#reqid=19&step=2&isuri=1&1921=survey
Figura II - Representación del modelo de demanda y oferta agregada
NGP
120
115 ←
4
110
Gráfica A
OAL OAL
13.0 14.0
OACoo
DA
DA
PIB (Miles de
millones)
NGPA
1104-
102
Gráfica B
OALDO
110 12.0 13.0
OAL
VOAC
DA
DAⓇ
PIB (Miles de
millones)
NGPA
112
110
DA
Gráfica C
OACO
13.0
OAL
15.0
OAC
OAL
DA
PIB (Miles
de millones)
Transcribed Image Text:Table 1.1.1. Percent Change from Preceding Period in Real Gross Domestic Product [Percent] Seasonally adjusted at annual rates https://apps.bea.gov/iTable/iTable.cfm?reqid=19&step=2#reqid=19&step=2&isuri=1&1921=survey Figura II - Representación del modelo de demanda y oferta agregada NGP 120 115 ← 4 110 Gráfica A OAL OAL 13.0 14.0 OACoo DA DA PIB (Miles de millones) NGPA 1104- 102 Gráfica B OALDO 110 12.0 13.0 OAL VOAC DA DAⓇ PIB (Miles de millones) NGPA 112 110 DA Gráfica C OACO 13.0 OAL 15.0 OAC OAL DA PIB (Miles de millones)
Annual Percentage Change
— Á Ń ON A ∞
Q1- 2004
Q1- 2006
Q1-2008
Q1-2010
Q1-2012
Q1-2014
Q1-2016
Q1-2018
Q1- 2020
[Quarter-Annual]
Annual Percentage Change in U.S. Real GDP
Transcribed Image Text:Annual Percentage Change — Á Ń ON A ∞ Q1- 2004 Q1- 2006 Q1-2008 Q1-2010 Q1-2012 Q1-2014 Q1-2016 Q1-2018 Q1- 2020 [Quarter-Annual] Annual Percentage Change in U.S. Real GDP
Expert Solution
Step 1: Defining consumption function

The consumption function shows the relationship between real GDP and consumption levels.


The investment function shows the relationship between real GDP and investment levels.


Aggregate demand is made of four parts out of which two parts are consumption function and investment function and the remaining two parts are government spending and net exports.

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