Draw a 45deg-line diagram showing an equilibrium in the

Question

Draw a 45°-line diagram showing an equilibrium in the goods market. Label the equilibrium level of real GDP, Y₁ .

Now show on your graph the situation when real GDP is equal to Y₂, where Y₂ is greater than Y₁ , and the situation when real GDP is equal to Y₃ , where Y₃ is less than Y₂ .

Be sure that your graph shows the level of aggregate expenditure and the level of unintended changes in inventories at Y₁ , Y₂ , and Y₃ .