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Unformatted text preview: Y *, is always a multiple of autonomous aggregate expenditure, A , which explains why m is referred to as the Keynesian multiplier. The determination of equilibrium real national income or GDP using the income-expenditure approach can be depicted graphically, as in Figure 1 . This figure shows three different aggregate expenditure curves , labeled AE 1 , AE 2 , and A 3 , which correspond to three different levels of autonomous expenditure, A 1 , A 2 , and A 3 . The upward slope of these AE curves is due to the positive value of the mpc. As real national income Y rises, so does the level of aggregate expenditure. The Keynesian condition for the determination of equilibrium real GDP is that Y = AE. This equilibrium condition is denoted in Figure 1 by the diagonal, 45° line, labeled Y = AE....
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- Fall '10
- aggregate expenditure, autonomous expenditure, real national income, equilibrium real GDP