Question
In an AE model with MPC=0.8, the government increases spending by 100 million. What will be the increase in Y? In the AD/AS model, the
In an AE model with MPC=0.8, the government increases spending by 100 million. What will be the increase in Y? In the AD/AS model, the AD curve will shift to the right by the amount of the increase in Y predicted by the Keynesian AE model. If the AD curve intersects the AS curve in the flat portion of the AS curve, what will be the increase in real output as a a result of the 100 million increase in government spending? What will be the increase in real output if the AD curve intersects the AS curve in the steep portion of the AS curve?
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Managerial Economics Theory Applications and Cases
Authors: Bruce Allen, Keith Weigelt, Neil A. Doherty, Edwin Mansfield
8th edition
978-0393124491, 393124495, 978-0039391277, 393912779, 978-0393912777
