Figure 3-7

-In Figure 3-7 above,if the natural real GDP is $2500,AP = $250,and the change in "a" = change in I = change in NX = 0,then the natural real GDP could be attained with a
A)$250 decrease in T.
B)$250 increase in G.
C)$1250 increase in G.
D)$500 decrease in T.

Question

Figure 3-7
 
-In Figure 3-7 above,if the natural real GDP is $2500,AP = $250,and the change in "a" = change in I = change in NX = 0,then the natural real GDP could be attained with a
A)$250 decrease in T. 
B)$250 increase in G. 
C)$1250 increase in G. 
D)$500 decrease in T.

Quizplus · Accepted Answer

An increase in government spending (G) directly increases aggregate demand, which can help the economy reach its natural real GDP level. A $250 increase in G would directly increase aggregate demand by the same amount, helping to close the gap to the natural real GDP without requiring changes in taxes (T), autonomous consumption (a), investment (I), or net exports (NX).

Figure 3-7 -In Figure 3-7 Above,if the Natural Real GDP Is $2500,AP