Question
The graph models an economy in equilibrium with a real GDP of $180billion$180billion. Suppose that consumers' expectations about future incomes change, causing unplanned inventory investment
The graph models an economy in equilibrium with a real GDP of $180billion$180billion. Suppose that consumers' expectations about future incomes change, causing unplanned inventory investment to increase by $30billion$30billion. Shift the planned aggregate expenditure (AE) line to show the effect of thischange.
Planned aggregate spending (billions of dollars)Real GDP (billions of dollars)0306090120150180210240270300030609012015018021024027030045 linePlanned AE
This change will cause the equilibrium level of real GDPto
decrease.
remain unchanged.
increase.
By how much will GDP change once the new equilibrium is reached? If GDP will decrease, be sure to include a negativesign.
GDP change:$
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