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Suppose there is some hypothetical economy in which households spend $0.50 of each additional doltar they earn and save the so.50 they have left over.

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Suppose there is some hypothetical economy in which households spend $0.50 of each additional doltar they earn and save the so.50 they have left over. The following graph plots the economy's initial aggregate demand curve (AD1) Suppose now that the goverment increases its purchases by $3.5 billion. Use the green Mne (triangie symbov) on the following graph to show the aggregate demand curve (AD2) after the inultipler eHfect takes pigce. Hint: Be sure the new aggregate demand curve (AD2) is parallel to AD1. You can see the slope of AD j by selecting it on the following graph. The following graph plots equilibrium in the money market at an interest rate of 6% and a quantity of maney equal to $60 bilion. Show the impact of the increase in government purchases on the interest rate by shifting one or both of the curves an the following graph. Suppose that for every increase in the interest rate of one percentage point, the level of investment spending declines by 50,5 bilition. Based on the changes made to the money market in the previous scenarlo, the new interest rate causes the level of investment spending to by

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