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Consider the figure to the right, which applies to an economy in which the marginal propensity to consume is 0.80. Why does a $0.3 trillion
Consider the figure to the right, which applies to an economy in which the marginal propensity to consume is 0.80. Why does a $0.3 trillion increase in planned real investment spending cause the aggregate demand curve to shift rightward by exactly $1.50 trillion at the initial equilibrium price level of 110? At the initial equilibrium price level of 110, total planned real spending rises by the $0.3 trillion increase in planned real investment spending times the multiplier the value of which is Hence, the AD curve must shift rightward by the amount of the increase in total planned real spending at this price level, which therefore equals $1.50 trillion. (Enter your response rounded to two decimal places.)
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