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Consider the graphical representation of the Keynesian cross for a hypothetical country, where the planned aggregate spending line is graphed against the 45 line. Suppose that, in this country, there is an autonomous increase in aggregate spending of $20 billion. Show this change on the graph.

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Final answer:

In a Keynesian cross diagram, an autonomous increase of $20 billion in aggregate spending shifts the aggregate expenditure line upward, resulting in a new, higher equilibrium level of real GDP on the 45-degree line.

Step-by-step explanation:

The Keynesian cross diagram is a graphical representation in macroeconomics that demonstrates the relationship between aggregate expenditure and national income. An autonomous increase in aggregate spending shifts the planned aggregate spending line upwards by the amount of the increase. In our hypothetical country, the original equilibrium occurs where the aggregate expenditure schedule crosses the 45-degree line, indicating a balance between the economy's output and spending.

If the autonomous aggregate spending increases by $20 billion, the aggregate expenditure line will shift vertically upwards by this amount. This would result in a new intersection point with the 45-degree line at a higher level of real GDP, assuming a multiplier effect larger than one. The new equilibrium level of GDP would be at a point higher than the original $6,000 but still below the potential GDP of $7,000, given the parameters of the example.

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