Macroeconomics 19th Edition by Campbell McConnell , Stanley Brue,Sean Flynn

Exercise 1

Refer to FigurE₁a and 1b in the Appendix. Assume that Q 1 iS₃00, Q 2 iS₂00, Q 3 iS₁00, P₃ iS₁20, P₂ iS₁00, and P₁ is 80. If the price level increases from P₁ to P₃ in graph (b), in what direction and by how much will real GDP change? If the slopes of the AE lines in FigurE₁a are.8 and equal to the MPC, in what direction will the aggregate expenditures schedule in FigurE₁a need to shift to produce the previously determined change in real GDP? What is the size of the multiplier in this example?