6. A government spends $50,000 as an expansionary fiscal policy. It pays this money to a vendor who sells its product for $50 each. (Assume the spending multiplier is 1, so we can ignore it.) a. If prices are completely fixed, then the firm's output will increase by: b. If prices are flexible and increase to $100, then the firm's output will increase by: c. Which will have a have a bigger impact on real GDP? (a. or b.) d. Which will have a bigger impact on unemployment? (a. or b.)

6. A government spends $50,000 as an expansionary fiscal policy. It pays this money to a vendor who sells its product for $50 each. (Assume the spending multiplier is 1, so we can ignore it.) a. If prices are completely fixed, then the firm's output will increase by: b. If prices are flexible and increase to $100, then the firm's output will increase by: c. Which will have a have a bigger impact on real GDP? (a. or b.) d. Which will have a bigger impact on unemployment? (a. or b.)

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter11: Fiscal Policy

Section: Chapter Questions

Problem 2.9P

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