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Difficulty: Medium Figure 13-4

Question 97

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Difficulty: Medium Figure 13-4 Difficulty: Medium Figure 13-4 -Refer to Figure 13-4. Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, JI<sub>P</sub> = Planned Investment and Y* = equilibrium real GDP. Suppose AE = C + I<sub>P</sub>, I<sub>P</sub> is autonomous and the consumption function is C = $1,000 billion + 0.5Y. If firms produced a real GDP greater than the Y*, A) AE would be greater than real GDP. B) AE would fall short of real GDP. C) actual investment would be less than I<sub>P</sub>. D) there would be an excess demand for real GDP.
-Refer to Figure 13-4. Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, JIP = Planned Investment and Y* = equilibrium real GDP. Suppose AE = C + IP, IP is autonomous and the consumption function is C = $1,000 billion + 0.5Y. If firms produced a real GDP greater than the Y*,


A) AE would be greater than real GDP.
B) AE would fall short of real GDP.
C) actual investment would be less than IP.
D) there would be an excess demand for real GDP.

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