Figure 18-12

-Refer to Figure 18-12.An increase in government purchases of $200 billion causes aggregate demand to shift ultimately from AD₁ to AD₂.Assuming a constant price level,the difference in real GDP between point A and point B will be ________ $200 billion.

Question

Figure 18-12
 
-Refer to Figure 18-12.An increase in government purchases of $200 billion causes aggregate demand to shift ultimately from AD₁ to AD₂.Assuming a constant price level,the difference in real GDP between point A and point B will be ________ $200 billion.

Quizplus · Accepted Answer

When government purchases increase by $200 billion, aggregate demand shifts from AD₁ to AD₂. This causes the equilibrium output to increase from Y₁ to Y₂, which is greater than the original output level. Therefore, the difference in real GDP between point A (Y₁) and point B (Y₂) is greater than $200 billion.

Figure 18-12 -Refer to Figure 18-12.An Increase in Government Purchases of $200