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To find the level of equilibrium real national income or GDP

To find the level of equilibrium real national income or...

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To find the level of equilibrium real national income or GDP, you simply find the intersection of the  AE  curve with the 45 °  line. The levels of real GDP that correspond to these intersection points are  the  equilibrium  levels of real GDP, denoted in Figure 1  as  Y 1 Y 2 , and  Y 3 . Note that each  AE  curve  corresponds to a different equilibrium level for  Y.  Note also that each  Y  is a  multiple  of the level of  autonomous aggregate expenditure, 
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Unformatted text preview: A , as was found in the algebraic determination of the level of equilibrium real GDP. Graphical illustration of the Keynesian theory. The Keynesian theory of the determination of equilibrium output and prices makes use of both the income-expenditure model and the aggregate demand-aggregate supply model, as shown in Figure 2 . Figure 2 The Keynesian income-expenditure approach and aggregate demand and supply...
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