Aggregate Expenditures and Multipliers Assignment 2 150 148

Aggregate Expenditures and Multipliers Assignment 2 15.0 14.8 I 140 2 132 13,0 45° 0 130 14 0 Real GDP (trillions of dollars) 15 1. Using the aggregate expenditure function above, what is the current level of real GDP?

Solution

$14trillion

We know to find the equilibrium we will see where the Aggregate expenditure intersects the 45 degree line.

Here 45 degree line is Aggregate supply curve and Aggregate expenditure is the aggregate demand curve and equilibrium is at a point where AD=AS.

Thus the intersection of Aggregate expenditure with 45degree line will show the equilibrium level of GDP