Figure 13-5 -Refer to Figure 13-5. Let Y = Real GDP, AE

question 119

Multiple Choice

Figure 13-5
-Refer to Figure 13-5. Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption, JI_P = Planned Investment and Y* = equilibrium real GDP. Suppose AE = C + I_P, I_P is autonomous and the consumption function is C = $1,000 billion + 0.75Y. If firms produced a real GDP less than the Y*,

• A) AE would be greater than real GDP.
• B) AE would fall short of real GDP.
• C) actual investment would be greater than I_P.
• D) there would be an excess supply real GDP.

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