Question: I) Starting from point A on PAE0 , briefly explain THREE reasons that would lead to change in PAE from PAE0 to PAE1 ? (5

I) Starting from point A on PAE0 , briefly explain THREE reasons that would lead to change in PAE from PAE0 to PAE1 ? (5 marks)

II) Following from part a) above, what will be the effect on the multiplier. (2 marks)

III) Explain the process of adjustment from the intial equilibrium A to the new equilibirum B. (3 marks)

I) Starting from point A on PAE0 , briefly explain THREE reasons

10 Refer to the diagram for the Keynesian Income Expenditure diagram below. Mar PAE Y = PAE PAE1 B PAEo A Y Yo Y1

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