Explain how an equilibrium is achieved in the Keynesian cross diagram
The Keynesian cross diagram has aggregate expenditures on the vertical axis and real GDP as a measure of output on the horizontal axis. A vertical line shows potential GDP or full employment GDP. The 45-degree line shows all points where aggregate expenditures and output are equal. The aggregate expenditure schedule shows how total spending or aggregate expenditure increases as output or real GDP rises. Equilibrium occurs at the point where the aggregate expenditure schedule intersects the 45-degree line. At equilibrium, aggregate expenditure is equal to real GDP.
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If a company could spend $3 per bicycle on a safety device that would prevent $2,000 worth of harm for every 1,000 bicycles sold, spending the $3 would be a cost-justified precaution
Indicate whether the statement is true or false
Which of the following would NOT shift the U.S. aggregate demand curve?
A) a change in income in Canada B) a change in the quantity of capital in the United States C) an expectation that inflation will be lower in the future D) U.S. monetary and fiscal policy