Corresponding slump in consumption spending

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A) Economists generally believe recessions occur with a slump in investment spending. This is followed by a corresponding slump in consumption spending. Explain why.

B) From Figure 10.9, suppose GDPreal* is $1 trillion, an autonomous increase in aggregate spending is $100 billion, and MPC = 0.5. Calculate the equilibrium real GDP. Explain

how the new equilibrium was established.

Reference no: EM131377208

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