Answer to Question #71471 in Macroeconomics for ashley

Question #71471
Suppose a country institutes an investment tax credit, and this leads to an increase in investment spending of $100 billion. Suppose the multiplier is 1.5 and the economy’s real GDP is $5,000 billion. A. In which direction will the aggregate demand curve shift and by how much? B. Explain using a graph why the change in real GDP is likely to be smaller than the shift in the aggregate demand curve
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Expert's answer
2017-11-30T15:32:07-0500
Aggregate demand will increase and shift to upward by (100*1.5) = 150 billions

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