4. Expenditures gaps The following graph shows the aggregate expenditures line (AE) for an economy where current equilibrium output is $400 billion and full- employment output is $650 billion. 800 45-degree line 700 AE 600 AE 500 AGGREGATE EXPENDITURES (Billions of dollars) 400 300 200 100 Full-employment GDP 0 0 100 200 300 400 500 600 700 800 REAL GDP (Billions of dollars) negative/positive The economy is experiencing a GDP gap with the absolute value of the gap equal to $ billion. To close the GDP gap would require a $ billion in government spending. Thus the spending multiplier for this economy is Increase/ decrease 0.385/0.6/0.615/0.625/1.667 On the graph, shift the AE line to show the change in the aggregate expenditures line necessary to close the GDP gap