Suppose Kirvensia is a closed economy and the economy is at its initial equilibrium. Then, the...

  

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Suppose Kirvensia is a closed economy and the economy is at its initial equilibrium. Then, the government increased its spending. Use an appropriate diagram to explain the rise on the government spending on equilibrium national income in the closed economy of Kirvensia. (You are supposed to give a clear and full explanation of which of the given figures you use) Price level, P Ро Interest rate, Equilibrium interest rate LRAS Long-run equilibrium Y (Figure 1) Equilibrium level of incomo (Figure 3) SRAS LM AD Income, output, Y 15 Income, output, Y Price level, P Expenditure (planned, PE actual, Y) 45° Long-run aggregate supply, LRAS Y (Figure 2) Equilibrium income (Figure 4) Income, output, Y Actual expenditure, Y = PE Planned expenditure, PE=C+I+G Income, output, Y Suppose Kirvensia is a closed economy and the economy is at its initial equilibrium. Then, the government increased its spending. Use an appropriate diagram to explain the rise on the government spending on equilibrium national income in the closed economy of Kirvensia. (You are supposed to give a clear and full explanation of which of the given figures you use) Price level, P Ро Interest rate, Equilibrium interest rate LRAS Long-run equilibrium Y (Figure 1) Equilibrium level of incomo (Figure 3) SRAS LM AD Income, output, Y 15 Income, output, Y Price level, P Expenditure (planned, PE actual, Y) 45° Long-run aggregate supply, LRAS Y (Figure 2) Equilibrium income (Figure 4) Income, output, Y Actual expenditure, Y = PE Planned expenditure, PE=C+I+G Income, output, Y

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Figure 1 The initial equilibrium The initial equilibrium point is shown by the intersection of the a... View the full answer