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Determine the slope of ae line

Assignment Help Macroeconomics
Reference no: EM131137959

1. According to the classicals, deviations from full employment are due to adjustments from shifts in the labor supply and demand curves.  Why doKeynesians argue this point?

2. Determine the slope of this AE line, and then complete the schedule below. Do so. Hint words: Linear relationship Slope?

Income     Aggregate Expenditures (C + I + G)
$ 650       $1400
$1650       $2150
$2650        _____
$3650        _____
$4650        _____
$5650        _____
Draw this graph complete with an AP curve.

3. At what level of output (income) will this economy operate?

4. Line up this AE/AP graph above a production graph. Demonstrate with a dotted line that there is a recessionary gap where potential output is $8650.

5. How much of a gap is there?

6. What is the MPS and the Multiplier?

7. The government can close this gap two ways. They can increase government expenditures by $_____________ or they can reduce taxes by $______________. Show all work.

Reference no: EM131137959

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