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

question 52

Multiple Choice

Figure 13-5

-Refer to Figure 13-5.Let Y = real GDP, AE = Aggregate Expenditures, C = Consumption,
I_P = Planned Investment.Consider a simple economy where AE = C + I_P, I_P is autonomous
And the consumption function is given by C = $1,000 billion + 0.75Y.If potential real GDP is $9,000 billion, by how much must planned investment change to reach potential real GDP?

• A)I_P must increase by $250 billion.
• B)I_P must decrease by $250 billion.
• C)I_P must increase by $1,000 billion.
• D)I_P must decrease by $1,000 billion.

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