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

Exercise 20

Suppose that the price level is constant and that investment decreases sharply. How would you show this decrease in the aggregate expenditures model? What would be the outcome for real GDP? How would you show this fall in investment in the aggregate demand-aggregate supply model, assuming the economy is operating in what, in effect, is a horizontal section of the aggregate supply curve? LO5