3/25/22, 8:59 PMAssignment Print Viewb. To restore this economy to its long-run equilibrium, the Federal Reserve needs to shift theaggregate demand curve to the leftV by $billion.c. If the Federal Reserve were to reduce investment demand to cause the shift in aggregate demand,with an MPC = 0.75, investment demand would need to decrease byneeded change in aggregate demand.billion to achieve the%3Dd. Use the money market and investment demand graphs to illustrate the monetary policy change theFederal Reserve would need to make in order to restore aggregate demand and real GDP back to thelong-run equilibrium levels.Instructions: In the investment demand graph below, use the tool provided "Investment" to plot a newlevel of investment demand.Investment Demand11Tools10--Investment8.75431246.810 12 14 16 18 20Quantity of Investment (billions of dollars)Instructions: In the money market graph below, use the tool provided "Ms,1" to draw a new moneysupply curve. Use the tool provided "New Equilibrium" to plot a new equilibrium interest rate.https://ezto.mheducation.com/hm.tpx?todo=c15SinglePrintView&singleQuestionNo=8.&postSubmission View=13252718377637707&wid=13252718466136846&rol... 2/3Interest Rate (percent)LO 3/25/22, 8:59 PMAssignment Print View8.Assume the economy is currently in equilibrium at its full-employment level of output, the moneymarket is in equilibrium, and the MPC = 0.75.a. Suppose there is an increase in government spending that causes aggregate demand to increaseby $16 billion. Show the increase in aggregate demand on the graph.Instructions: Use the tool provided "Aggregate Demand" to plot the new aggregate demand curve.Use the tool provided "New GDP" to plot the new equilibrium.AD and AS Model200ToolsLRAS180AS160Aggregate Dei New GDP1401201008060AD402016 32 48 64 80 96 112 128 144 160Real GDP (billions of dollars)Now suppose the Federal Reserve wants to keep inflation from hurting the economy and maintainoutput at the full-employment level.https://ezto.mheducation.com/hm.tpx?todo=c15SinglePrintView&singleQuestionNo=8.&postSubmissionView=13252718377637707&wid=13252718466136846&rol...1/3Price Level

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8. Assume the economy is currently in equilibrium at its full-employment level of output, the money market is in equilibrium, and the MPC = 0.75. a. Suppose there is an increase in government spending that causes aggregate demand to increase by $16 billion. Show the increase in aggregate demand on the graph. Instructions: Use the tool provided "Aggregate Demand" to plot the new aggregate demand curve. Use the tool provided "New GDP" to plot the new equilibrium. AD and AS Model 200 Tools LRAS 180 AS 160 Aggregate Dei New GDP 140 120 100 80 60 AD 40 20 16 32 48 64 80 96 112 128 144 160 Real GDP (billions of dollars) Now suppose the Federal Reserve wants to keep inflation from hurting the economy and maintain output at the full-employment level. Price Level

8. Assume the economy is currently in equilibrium at its full-employment level of output, the money market is in equilibrium, and the MPC = 0.75. a. Suppose there is an increase in government spending that causes aggregate demand to increase by $16 billion. Show the increase in aggregate demand on the graph. Instructions: Use the tool provided "Aggregate Demand" to plot the new aggregate demand curve. Use the tool provided "New GDP" to plot the new equilibrium. AD and AS Model 200 Tools LRAS 180 AS 160 Aggregate Dei New GDP 140 120 100 80 60 AD 40 20 16 32 48 64 80 96 112 128 144 160 Real GDP (billions of dollars) Now suppose the Federal Reserve wants to keep inflation from hurting the economy and maintain output at the full-employment level. Price Level

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter10: Bringing In The Supply Side: Unemployment And Inflation?

Section: Chapter Questions

Problem 4TY

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