Exhibit 11-2

-Refer to the graph in the exhibit.Consider an economy characterized by the aggregate expenditure line.Suppose autonomous government spending decreased by $100.What would the equilibrium real GDP be equal to?
A) $400
B) $500
C) $600
D) $700

Question

Exhibit 11-2
 
-Refer to the graph in the exhibit.Consider an economy characterized by the aggregate expenditure line.Suppose autonomous government spending decreased by $100.What would the equilibrium real GDP be equal to?  
A) $400 
B) $500 
C) $600 
D) $700

Quizplus · Accepted Answer

The decrease in autonomous government spending will shift the aggregate expenditure line down by $100. This will lead to a decrease in equilibrium real GDP. The new equilibrium real GDP will be at the point where the aggregate expenditure line intersects the 45-degree line. This point is at $400.

Exhibit 11-2 -Refer to the Graph in the Exhibit.Consider an Economy Characterized