The graph below characterizes a simple economy with only two components of aggregate expenditures: consumption and investment.Consumption and aggregate expendituresper year (billions of dollars)$6,000Multiplier5,0004,0003,0002,0001,0000Find the value of the multiplier in this example45°AE$1,000 2,000 3,000 4,000 5,000 6,000Real GDP per year (billions of dollars) Determine the effect of each of the following on the aggregate expenditures (AE) curve:An increase in govemment spendingA decrease in investmentAn increase in taxesA higher marginal propensity to consumeAE Curve#Steeper #Shifts down#Flatter#Shifts up

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The graph below characterizes a simple economy with only two components of aggregate expenditures: consumption and investment. Consumption and aggregate expenditures per year (billions of dollars) $6,000 Multiplier 5,000 4,000 3,000 2,000 1,000 0 Find the value of the multiplier in this example 45° AE C $1,000 2,000 3,000 4,000 5,000 6,000 Real GDP per year (billions of dollars)

The graph below characterizes a simple economy with only two components of aggregate expenditures: consumption and investment. Consumption and aggregate expenditures per year (billions of dollars) $6,000 Multiplier 5,000 4,000 3,000 2,000 1,000 0 Find the value of the multiplier in this example 45° AE C $1,000 2,000 3,000 4,000 5,000 6,000 Real GDP per year (billions of dollars)

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter9: Aggregate Demand

Section: Chapter Questions

Problem 4.8P

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