ARE MY ANSWERS RIGHT? You can see that if planned investment does not remain con

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ARE MY ANSWERS RIGHT?

You can see that if planned investment does not remain constant during the multiplier process, the final effect on GDP is smaller than it would be if planned investment remained constant. If Investors are forward-looking and regard changes in housing demand as temporary, the second decrease in planned investment is likely to be smaller that it would be if the changes are perceived as permanent. Thus the fact that planned investment is not independent of changes in GDP has a stabilizing effect and forward-looking behavior has a destabilizing effect with regards to the multiplier process. The graph that follows depicts an economy in equilibrium at the intersection of the aggregate expenditure and 45-degree line. Suppose there is a decrease in the demand for new houses that causes a $1 billion decrease in planned investment. Use the green lines (triangle symbols) to draw the new aggregate expenditure line after this shift. Note: While it is natural to start by placing a point at the vertical intercept and then using the slope to place another point, sometimes the graph tool's precision won't allow you to do that. Instead you may have to place points elsewhere. Now suppose the decrease in total GDP causes further decreases in the demand for new houses, such that planned Investment decreases by an additional $0.5 billion. Use the purple line (diamond symbols) to draw the second new aggregate expenditure line. The graph that follows depicts an economy in equilibrium at the intersection of the aggregate expenditure line after this shift. Note: While it is natural to start by placing a point at the vertical intercept and then using the slope to place another point, sometimes the graph tool's precision won't allow you to do that. Instead you may have to place points elsewhere Now suppose the decrease in total GDP causes further decreases in the demand for new houses, such that planned Investment decreases by an additional $0.5 billion. Use the purple line (diamond symbols) to draw the second new aggregate expenditure line.

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Perfectly correct.

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