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5. The slowing of the U.S. economy in early 2008 and the financial crisis in the fall lead to the passage of two bills

5. The slowing of the U.S. economy in early 2008 and the financial crisis in the fall lead to the passage of

5. The slowing of the U.S. economy in early 2008 and the financial crisis in the fall lead to the passage of two bills in Congress which equaled a $700 billion stimulus to the economy. The 2008 Real GDP equaled $11.7 trillion. a. Assuming the MPC =2/3, calculate the total change in Real GDP expected from the $700 billion stimulus over time. b. Illustrate this change with an Income-Expenditure graph. Draw the original 2008 planned Aggregate Expenditure function with the original Real GDP, then add the post-stimulus planned AE with the new Real GDP. Identif the AEs as 1 and 2 and the numbered Real GDPs at their equilibrium levels.

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