To AD 2: An increase in government purchases causes aggregate demand to shift ultimately from ADā to ADā. In the new equilibrium at point B, both real GDP and the price level have increased. The increase in real GDP is that indicated by the multiplier effect with a constant price level. A. greater than B. equal to C. less than D. There is insufficient information given here to draw a conclusion. Price level B ADā SRAS ADā Real GDP
Added by Christina H.
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Step 1: An increase in government purchases causes aggregate demand to shift from ADā to ADā, leading to an increase in the equilibrium level of real GDP. Show moreā¦
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