The accompanying graph depicts a macro equilibrium. Answer the questions based on the information in the graph.
Question:
The accompanying graph depicts a macro equilibrium. Answer the questions based on the information in the graph.
(a) What is the equilibrium rate of GDP?
(b) If full-employment real GDP is $1,200, what problem does this economy have?
(c) How large is the real GDP gap?
(d) If the multiplier were equal to 4, how much additional investment would be needed to increase aggregate demand by the amount of the initial GDP gap?
(e) Illustrate the changes in autonomous investment and induced consumption that occur in (d).
(f) What happens to prices when aggregate demand increases by the amount of the initial GDP gap?
(g) Is full employment restored by the AD shift?
Step by Step Answer:
The Macro Economy Today
ISBN: 978-1259291821
14th edition
Authors: Bradley R. Schiller, Karen Gebhardt