Illustrate in the following graph the impact of a sudden decline in consumer confidence that reduces autonomous
Question:
Illustrate in the following graph the impact of a sudden decline in consumer confidence that reduces autonomous consumption by $100 billion at the price level PF. Assume MPC = 0.5.
(a) What is the new equilibrium level of real output? (Don’t forget the multiplier.)
(b) How large is the real GDP gap?
(c) Did average prices (A) increase or (B) decrease?
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a 300 billion b 200 billion c Decrease Feedback a 300 billion The new equilibrium level o...View the full answer
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Related Book For
The Macro Economy Today
ISBN: 978-1259291821
14th edition
Authors: Bradley R. Schiller, Karen Gebhardt
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