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

Exercise 2

Refer to FigurE₂ in the Appendix and assume that Q 1 is $400 and Q 2 is $500, the price level is stuck at P₁, and the slopes of the AE lines in FigurE₂a are.75 and equal to the MPC. In what direction and by how much does the aggregate expenditures schedule in FigurE₂a need to shift to move the aggregate demand curve in FigurE₂b from AD1 to AD2? What is the multiplier in this example? Given the multiplier, what must be the distance between AD1 and the broken line to its right at P₁?