The following graph plots the planned expenditure line (PE) for an economy in which current equilibrium income is $400 billion and the full- employment income level is $650 billion. The graph also plots a 45 degree line on the same coordinate pair. REALEXPENDITURE (Billions of dollars) 800 700 600 500 400 300 200 100 0 0 100 200 300 400 45-degree line PE PE Full-Employment Income 500 INCOME (Billions of dollars) The economy is experiencing would require a $ 600 700 800 .The absolute value of the income gap is equal to $ billion. Closing the gap billion in government spending. Thus the value of the multiplier for this economy is On the graph, shift the PE line to show the change in the planned expenditure line necessary to close the income gap.

The following graph plots the planned expenditure line (PE) for an economy in which current equilibrium income is $400 billion and the full- employment income level is $650 billion. The graph also plots a 45 degree line on the same coordinate pair. REALEXPENDITURE (Billions of dollars) 800 700 600 500 400 300 200 100 0 0 100 200 300 400 45-degree line PE PE Full-Employment Income 500 INCOME (Billions of dollars) The economy is experiencing would require a $ 600 700 800 .The absolute value of the income gap is equal to $ billion. Closing the gap billion in government spending. Thus the value of the multiplier for this economy is On the graph, shift the PE line to show the change in the planned expenditure line necessary to close the income gap.

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter19: The Macroeconomic Perspective

Section: Chapter Questions

Problem 10SCQ: Explain briefly whether each of the following would cause GDP to overstate or understate the degree...

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