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Consider the diagram of the AE function and the 45 line to the right. Aggregate Expenditure Function 2,400- a. Suppose the level of actual national
Consider the diagram of the AE function and the 45 line to the right. Aggregate Expenditure Function 2,400- a. Suppose the level of actual national income is Y7. What is the level of desired aggregate expenditure? Is it greater or less than actual output? 45 line a 2,200- 2,000- The desired level of aggregate expenditure is $ 600, which is greater than the level of actual output. (Round your response to the nearest dollar.) 1,800- 1,600+ AED b. If actual income is Y 7, explain the process by which national income changes toward equilibrium. 1,400- Desired Aggregate Expenditure (AE) 1,200- 1,000- If the level of actual national income is Y7, the desired level of expenditures will be greater than the level of actual output. Therefore, the inventories of the firms will be depleted over time. As a result, firms will increase the level of their output. 800- 600- 400- c. Suppose the level of actual national income is Y4. What is the level of desired aggregate expenditure? Is it greater or less than actual output? 200+... Y1 0- 0 300 Y2LY3IY4 Y5 which is than the level of actual output. (Round your The desired level of aggregate expenditure is $ response to the nearest dollar.) 600 900 1,200 1,500 1,800 2,100 2,400 Actual Nominal Income (Y)
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