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The following table shows the real output demanded and supplied at various price levels in a hypothetical economy. Real Output Demanded Price Level Real Output
The following table shows the real output demanded and supplied at various price levels in a hypothetical economy. Real Output Demanded Price Level Real Output Supplied (Billions of dollars) (Index number) (Billions of dollars) 40 160 340 80 120 320 120 80 280 200 40 200 320 20 80 On the following graph, use the bive points (circle symbol) to plot the aggregate demand (Initial AD) curve for the economy. Then use the orange points (square symbol) to plot the aggregate supply (AS) curve for the economy. Note: Line segments will automatically connect the points. (?) 200 Initial AD 180 20 AS PRICE LEVEL (Billions of dollars) 80 New AD 1:00 240 320 REAL GDP (Index numbers) The equilibrium price level is , and the equilibrium level of real output is 80. 160,20, 120, 40 $80B, $240B. $2008, $160B, $120B Suppose that the government spending increases by $16 billion and the expenditure multiplier in this economy is 5. On the previous graph, use the purple points (diamond symbol) to Mustrate the effect of the increase in government spending on the aggregate demand (New AD) curve. The change in government spending the equilibrium level of real output by . The price level increase the multiplier effect. Decreases or increases? $40B. $168, $208, $8B, $808 Reinforces or weakens
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