Figure 27-12
-Refer to Figure 27-12.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.
A)equal to
B)less than
C)greater than
D)There is insufficient information given here to draw a conclusion.

Question

Figure 27-12 
-Refer to Figure 27-12.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.
A)equal to 
B)less than 
C)greater than 
D)There is insufficient information given here to draw a conclusion.

Quizplus · Accepted Answer

When the AD curve shifts from AD1 to AD2 due to an increase in government purchases of $200 billion and assuming a constant price level, the new equilibrium point (point B) will have a higher level of real GDP than the original equilibrium point (point A). Therefore, the difference in real GDP between point A and point B will be greater than $200 billion.

Figure 27-12 -Refer to Figure 27-12.An Increase in Government Purchases of $200