6. Aggregate expenditure and income

Suppose the following table shows consumption (C

C), investment (I

I), government purchases (G

G), and net exports (NX

NX) in a hypothetical economy for various levels of real GDP. Assume that the price level remains unchanged at all levels of real GDP.

Real GDPC

CI

IG

GNX

NX(Billions of dollars)(Billions of dollars)(Billions of dollars)(Billions of dollars)(Billions of dollars)500300250150-150600375250150-150700450250150-150800525250150-150900600250150-150

The following graph shows real GDP on the horizontal axis and aggregate expenditure on the vertical axis.

Use the orange line (square symbol) to plot a 45-degree line on this graph. Then use the blue points (circle symbols) to plot the aggregate expenditure line for this economy.

Note: Plot your points in the order in which you would like them connected. Line segments will connect the points automatically.

45-Degree Line

AE Line

Equilibrium Output

400

500

600

700

800

900

1000

1000

900

800

700

600

500

400

AGGREGATE EXPENDITURES (Billions of dollars)

REAL GDP (Billions of dollars)

On the previous graph, use the black point (plus symbol) to indicate the equilibrium output at this price level.