Derive the consumption function and use this relation in the aggregate demand function to derive an equation for the equilibrium in the goods market . Why the AD line is upward sloping? Suppose the government spending falls by 100 and in this case marginal propensity to consume is 0.8. what is the value of change in output. Draw a diagram to show the shift in AD line due to this change in government spending and output.

Derive the consumption function and use this relation in the aggregate demand function to derive an equation for the equilibrium in the goods market . Why the AD line is upward sloping? Suppose the government spending falls by 100 and in this case marginal propensity to consume is 0.8. what is the value of change in output. Draw a diagram to show the shift in AD line due to this change in government spending and output.

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter11: Managing Aggregate Demand: Fiscal Policy

Section: Chapter Questions

Problem 2TY

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