1. What assumption about price level is made in this chart?
2. Why does the AE line have the slope it has? What is this slope called? What does this slope represent?
3. The economy planned (and made) more expenditures than were actually produced by the economy. Will the economy be at point a, b, c, d or e?
4. Given 3., what must happen to compensate for this mismatch? How does the economy react to this to return to the equilibrium, recalling that at equilibrium AE=real GDP?
5. What does the point c represent?

19.0 d C+I+G+ (X-M) 18.8 Aggregate expenditure C (trillions of dollars) 18.0 e 17.2 b 17.0 a 45 0 17.0 18.0 19.0 Real GDP (trillions of dollars)