FIGURE 23-1 -Refer to Figure 23-1.Assume the Economy Is Initially in Equilibrium

question 60

Multiple Choice

FIGURE 23-1

-Refer to Figure 23-1.Assume the economy is initially in equilibrium with desired aggregate expenditure equal to real GDP at point V.The price level is P0.Now,suppose there is an increase in desired investment and no change in the price level.Which of the following statements describes the likely macroeconomic effects?

• A)The AE curve shifts up to AE2,the AD curve shifts to AD2,and a new equilibrium is established at point C,with real GDP at Y2.
• B)The AE curve shifts down to AE1,the AD curve shifts to AD1,and a new equilibrium is established at point F,with real GDP at Y1.
• C)The AE curve shifts to AE1,the AD curve shifts to AD1,and a new equilibrium is established at point E,with real GDP at Y2.
• D)The AE curve shifts to AE2,the AD curve shifts to AD1,and a new equilibrium is established at point F,with real GDP at Y2.
• E)The AE curve shifts to AE2,the AD curve shifts to AD2,and a new equilibrium is established at point E,with real GDP at Y2.

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Definitions:

Contour Lines

Lines on a map that connect points of equal elevation, representing the shape and elevation of the terrain.

Topographic Map

A detailed map that represents the three-dimensional features of a place, such as mountains and valleys, using contour lines to denote elevation changes.

Contours

Lines on a map that connect points of equal elevation, used to represent the shape and elevation of terrain.

Shaded-Relief Map

A map of an area whose relief is made to appear three-dimensional by simulating the shading on mountains, valleys, and other features.