c. Explain why the change in real GDP in response to an AD shock would not be solely determined by the simple multiplier for each of these economies. The simple multiplier measures the size of the change in real GDP caused by an AD shock when autonomous expenditure is held constant. Since the AD curve is positively sloped, the AD shock causes \boxed{\text{}} to increase, which causes the actual change in real GDP to be \boxed{\text{}} than the change predicted by the simple multiplier.
Added by Mathew H.
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It does not take into account other factors that can influence the overall impact of an AD shock on real GDP. Show more…
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