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

question 12

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 .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 ,the AD curve shifts to ,and a new equilibrium is established at point C,with real GDP at .
• B)The AE curve shifts down to ,the AD curve shifts to ,and a new equilibrium is established at point F,with real GDP at .
• C)The AE curve shifts to ,the AD curve shifts to ,and a new equilibrium is established at point E,with real GDP at .
• D)The AE curve shifts to ,the AD curve shifts to ,and a new equilibrium is established at point F,with real GDP at .
• E)The AE curve shifts to ,the AD curve shifts to ,and a new equilibrium is established at point E,with real GDP at .

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Definitions:

Expense

Costs or charges incurred in the operation of a business or the execution of a transaction.

RRSP

Registered Retirement Savings Plan, a Canadian investment vehicle for individuals to save for retirement while taking advantage of tax deferrals.

Years

Years are units of time that measure the duration or length of time an event has occurred or is expected to occur, usually related to financial calculations or investments.

Invest

To allocate resources, usually money, with the expectation of generating an income or profit.