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please help and also where to put the ad2 line on the graph Consider a hypothetical closed economy in which households spend $0.70 of each

please help and also where to put the ad2 line on the graph

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Consider a hypothetical closed economy in which households spend $0.70 of each additional dollar they earn and save the remaining $0.30. The marginal propensity to consume (MPC) for this economy is v , and the spending multiplier for this economy is V . Suppose the government In this economy decides to increase government purchases by $300 billion. The increase in government purchases will lead to an Increase in income, generating an initial change in consumption equal to v . This increases income yet again, causing a SECOHd change in consumption equal to V . The total change in demand resulting from the initial change in government spending is V . The following graph shows the aggregate demand curve (AD1 ) for this economy before the change in government spending. Use the green line (triangle symbol) to plot the new aggregate demand curve (ADZ) aer the multiplier effect takes place. For simplicity, assume that there is no "crowding out. " Hint: Be sure that the new aggregate demand curve (AD;) is parallel to the initial aggregate demand curve (AD; ). You can see the slope ofADI by selecting It on the graph. F 140 - .1 ._ 135 AD2 130 125

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