The graph gives an economy's AE curve when the economy is in long-run equilibrium. Equilibrium expenditure is $12 trillion. Draw a new AE curve that shows the effect of an increase in investment. Label it AE₁. Draw a point at the new equilibrium expenditure. Label it B. Draw another AE curve that shows equilibrium expenditure in the short run. Label it AE₂. Draw a point at the short-run equilibrium. Label it C. Finally, draw the AE curve when the economy returns to long-run equilibrium. Label it AE. 16 14- 12- 10-k 10 Aggregate expenditure (trillions of 2009 dollars) 45 degree line 11 15 12 13 14 Real GDP (trillions of 2009 dollars) AE 16
The graph gives an economy's AE curve when the economy is in long-run equilibrium. Equilibrium expenditure is $12 trillion. Draw a new AE curve that shows the effect of an increase in investment. Label it AE₁. Draw a point at the new equilibrium expenditure. Label it B. Draw another AE curve that shows equilibrium expenditure in the short run. Label it AE₂. Draw a point at the short-run equilibrium. Label it C. Finally, draw the AE curve when the economy returns to long-run equilibrium. Label it AE. 16 14- 12- 10-k 10 Aggregate expenditure (trillions of 2009 dollars) 45 degree line 11 15 12 13 14 Real GDP (trillions of 2009 dollars) AE 16
Chapter9: Demand-side Equilibrium: Unemployment Or Inflation?
Section9.A: The Simple Algebra Of Income Determination And The Multiplier
Problem 4TY
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