Total production (TP) and the level of natural real GDP (NRGDP) for a hypothetical economy

QUESTION

Total production (TP) and the level of natural real GDP (NRGDP) for a hypothetical economy are represented on the graph that follows. When real GDP is $525 billion, consumption is $420 billion, government purchases are $75 billion, and investment is $55 billion. When real GDP is $575 billion, consumption is $445 billion, government purchases are $75 billion, and investment is $55 billion. With this information, use the blue line (circle symbol) to plot the economy’s total expenditure function within a simplified Keynesian framework.See Graph # 1The economy is in equilibrium when real GDP is ($550 billion, $525 billion, $625 billion, or $575 billion). At this point, the economy is also in(recessionary gap, inflationary gap, or Say’s paradox).Which of the following did Keynes argue would be needed to move the economy to equilibrium at natural real GDP? Check all that apply.A decrease in consumptionA decrease in government purchasesAn increase in investmentAn increase in government purchases

ANSWER:

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