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Why does the ae line have the slope it has

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Reference no: EM132586683

-What assumption about price level is made in this chart?

-Why does the AE line have the slope it has? What is this slope called? What does this slope represent?

-The economy planned (and made) more expenditures than were actually produced by the economy. Will the economy be at point a, b, c, d or e?

-Given 3., what must happen to compensate for this mismatch? How does the economy react to this to return to the equilibrium, recalling that at equilibrium AE=real GDP?

-What does the point c represent?

Reference no: EM132586683

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