Question
Suppose that in a simple economy, there is an increase in government expenditures of $200 billion/year. Equations for aggregate demand before and after the increase
Suppose that in a simple economy, there is an increase in government expenditures of $200 billion/year. Equations for aggregate demand before and after the increase (all amounts are in billions of dollars per year) are below.
Before: AD=500+0.75Y
After: AD=700+0.75Y
Graph the change in equilibrium Y in a Keynesian Cross Diagram. Show on your graph the initial increase in AD, the total increase in Y, and the equilibrium before and after the change in government expenditures. What is the value of the multiplier?
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The Great Convergence Information Technology And The New Globalization
Authors: Richard Baldwin
1st Edition
067466048X, 9780674660489
