True or False. If spending exceeds output, real GDP will decline as firms cut back on production. Shown below is the aggregate expenditures model composed of consumption and investment spending for a closed economy. Show the effect of a $500 addition in government spending.Instructions: Click and drag on the expenditure line to move it to the correct position given the $500 addition in government spending.Aggregate expenditures (billions)16000-150001400013000+12000-11000-1000045°10000 11000A Closed EconomyAC+I+G12000 13000 14000 15000 16000Real GDP (billions)resetLooking at your graph, determine whether equilibrium GDP has increased, decreased, or stayed the same given the size of the government purchases that you selected.Equilibrium GDP has increased ▾ by $

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True or False. If spending exceeds output, real GDP will decline as firms cut back on production.

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter11: Fiscal Policy

Section: Chapter Questions

Problem 6E

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Question

True or False. If spending exceeds output, real GDP will decline as firms cut back on production.

Shown below is the aggregate expenditures model composed of consumption and investment spending for a closed economy. Show the effect of a $500 addition in government spending.
Instructions: Click and drag on the expenditure line to move it to the correct position given the $500 addition in government spending.
Aggregate expenditures (billions)
16000-
15000
14000
13000+
12000-
11000-
10000
45°
10000 11000
A Closed Economy
A
C+I+G
12000 13000 14000 15000 16000
Real GDP (billions)
reset
Looking at your graph, determine whether equilibrium GDP has increased, decreased, or stayed the same given the size of the government purchases that you selected.
Equilibrium GDP has increased ▾ by $

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