Elucidate using a graph why the change in real gdp

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Reference no: EM1360590

Suppose a country decreases government purchases by $100 billion. Suppose the multiplier is 1.5 and the economy's real GDP is $5,000 billion.

a.In which direction will the aggregate demand curve shift and by how much?

b. Elucidate using a graph why the change in real GDP is likely to be smaller than the shift in the aggregate demand curve.

Reference no: EM1360590

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