Macroeconomics 20th Edition by Campbell McConnell ,Stanley Brue ,Sean Flynn

Exercise 16

Refer to Figure 1a and 1b in the Appendix. Assume that Q 1 is 300, Q 2 is 200, Q 3 is 100, P 3 is 120, P 2 is 100, and P 1 is 80. If the price level increases from P 1 to P 3 in graph (b), in what direction and by how much will real GDP change? If the slopes of the AE lines in Figure 1a are.8 and equal to the MPC, in what direction will the aggregate expenditures schedule in Figure 1a need to shift to produce the previously determined change in real GDP? What is the size of the multiplier in this example? LO5