Use the graph to illustrate the effects of a $10 billion increase in government spending. Assume that the economy is initially producing at full employment, and the spending multiplier (m³) is 10. 165 LRAS 160 155 150 145 140 135 130 125 AD 120 115 50 100 150 200 250 300 350 400 450 500 Real GDP How much of each additional dollar of income is devoted to consumption? MPC = $ Price level (P)
Use the graph to illustrate the effects of a $10 billion increase in government spending. Assume that the economy is initially producing at full employment, and the spending multiplier (m³) is 10. 165 LRAS 160 155 150 145 140 135 130 125 AD 120 115 50 100 150 200 250 300 350 400 450 500 Real GDP How much of each additional dollar of income is devoted to consumption? MPC = $ Price level (P)
Chapter9: Aggregate Demand
Section: Chapter Questions
Problem 6.13P
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Transcribed Image Text:Use the graph to illustrate the effects of a $10 billion increase in government spending. Assume that the economy is initially
producing at full employment, and the spending multiplier (m³) is 10.
165
LRAS
160
155
150
145
140
135
130
125
AD
120
115
50
100
150
200
250
300
350
400
450
500
Real GDP
How much of each additional dollar of income is devoted to consumption?
MPC = $
Price level (P)
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