MACROECONOMICS FOR TODAY
10th Edition
ISBN: 9781337613057
Author: Tucker
Publisher: CENGAGE L
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Consider a hypothetical economy in which households spend $0.50 of each additional dollar they earn and save the remaining $0.50. The following graph shows the economy's initial aggregate demand curve (AD1AD1).
Suppose the government increases its purchases by $5 billion.
After the multiplier effect, the increase in government purchases will cause the quantity of output demanded to by
billion at each price level.
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