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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*,

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