Difficulty: Medium Figure 13-4

question 143

Multiple Choice

Difficulty: Medium Figure 13-4
-Refer to Figure 13-4. Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption,
I_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 + 0.5Y. 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_P.
• D) there would be an excess demand for real GDP.

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