ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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5.
In an economy, the MPC is 0.5. The graph on the right
depicts the economy's aggregate demand curve.
Suppose the economy starts out at Point A on
the aggregate demand curve. Draw the AE
curve for this case.
a.
b.
C.
d.
Suppose an increase in the price level causes the
economy to move to Point B on the aggregate
demand curve. Draw the new AE curve.
Suppose government spending decreases by
$0.2T. Draw the new AD curve.
In place of the change in part (c), suppose net
taxes decrease by $0.2T. Draw the new AD
curve.
Price
Level
(P)
170
160
150
140
130
120
110
100
90
80
70
60
AD
2.6
3.0 3.4 3.8 4.2 4.6
2.8 3.2 3.6 4.0 4.4 4.8
Y
(T of $)
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Transcribed Image Text:5. In an economy, the MPC is 0.5. The graph on the right depicts the economy's aggregate demand curve. Suppose the economy starts out at Point A on the aggregate demand curve. Draw the AE curve for this case. a. b. C. d. Suppose an increase in the price level causes the economy to move to Point B on the aggregate demand curve. Draw the new AE curve. Suppose government spending decreases by $0.2T. Draw the new AD curve. In place of the change in part (c), suppose net taxes decrease by $0.2T. Draw the new AD curve. Price Level (P) 170 160 150 140 130 120 110 100 90 80 70 60 AD 2.6 3.0 3.4 3.8 4.2 4.6 2.8 3.2 3.6 4.0 4.4 4.8 Y (T of $)
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