AACSB: Able to translate knowledge of business and management into practice
Refer to Figure 18.5 for the following question.
Figure 18.5
-Refer to Figure 18.5.If government purchases increase by $100 billion and lead to an ultimate increase in aggregate demand as shown in the graph,the difference in real GDP between point A and point B will be ________.

Question

AACSB: Able to translate knowledge of business and management into practice
Refer to Figure 18.5 for the following question.
Figure 18.5 
-Refer to Figure 18.5.If government purchases increase by $100 billion and lead to an ultimate increase in aggregate demand as shown in the graph,the difference in real GDP between point A and point B will be ________.

Quizplus · Accepted Answer

The graph shows that at point A, real GDP is $10 trillion and at point B, real GDP is $11 trillion. Therefore, the increase in real GDP due to the increase in government purchases is $11 trillion - $10 trillion = $1 trillion. Since the increase in government purchases is only $100 billion, this means that the difference in real GDP between point A and point B is more than $100 billion.

AACSB: Able to Translate Knowledge of Business and Management into Practice