If this economy was producing exactly $1,200 worth of real GDP and then government cut its spending in half, the economy would

government spending at an output level of $0 = $__80_____

government spending at an output level of $0 = $__80_____

Question

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Based on the graph
above,

35. government spending at an output level of $0 = $__80_____

36. government spending at an
output level of $1,200 = $______

37. Prior to any spending by
government, the economy was achieving equilibrium at an output level of $__800____

38. When government spending
was added to private sector spending, aggregate expenditures increased by $__80____

As a consequence of this added
spending by government, aggregate output

39. increased by $__400____

40. to a total of $___1200_____.

41. In this case, the simple
spending multiplier is _______.

42. If this economy was producing exactly $1,200 worth of real GDP and
then government cut its spending in half, the economy would

a) start to expand b) start
to contract c) not be affected

government spending at an output level of $0 = $__80_____


 

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