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Instructions: Enter your answer as a whole number. If you are entering a negative number include a minus sign. a. How much does aggregate demand need to change to restore the economy to its long-run equilibrium? %24 billion b. If the MPC is 0.8, how much do taxes need to change to shift aggregate demand by the amount you found in part a? $4 billion Suppose instead that the MPC is 0.75. c. How much does aggregate demand and taxes need to change to restore the economy to its long-run equilibrium? Aggregate demand needs to change by $ billion and taxes need to change by $ billion.

Instructions: Enter your answer as a whole number. If you are entering a negative number include a minus sign. a. How much does aggregate demand need to change to restore the economy to its long-run equilibrium? %24 billion b. If the MPC is 0.8, how much do taxes need to change to shift aggregate demand by the amount you found in part a? $4 billion Suppose instead that the MPC is 0.75. c. How much does aggregate demand and taxes need to change to restore the economy to its long-run equilibrium? Aggregate demand needs to change by $ billion and taxes need to change by $ billion.

Economics: Private and Public Choice (MindTap Course List)
Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506725
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter12: Fiscal Policy, Incentives, And Secondary Effects
Section: Chapter Questions
Problem 8CQ
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80 60 AD 40 100 200 300 400 500 600 700 800 Real GDP (billions of dollars) Instructions: Enter your answer as a whole number. If you are entering a negative number include a minus sign. a. How much does aggregate demand need to change to restore the economy to its long-run equilibrium? 24 billion b. If the MPC is 0.8, how much do taxes need to change to shift aggregate demand by the amount you found in part a? 24 billion Suppose instead that the MPC is 0.75. c. How much does aggregate demand and taxes need to change to restore the economy to its long-run equilibrium? Aggregate demand needs to change by $ billion and taxes need to change by $ billion. Pr
Transcribed Image Text:80 60 AD 40 100 200 300 400 500 600 700 800 Real GDP (billions of dollars) Instructions: Enter your answer as a whole number. If you are entering a negative number include a minus sign. a. How much does aggregate demand need to change to restore the economy to its long-run equilibrium? 24 billion b. If the MPC is 0.8, how much do taxes need to change to shift aggregate demand by the amount you found in part a? 24 billion Suppose instead that the MPC is 0.75. c. How much does aggregate demand and taxes need to change to restore the economy to its long-run equilibrium? Aggregate demand needs to change by $ billion and taxes need to change by $ billion. Pr
The graph below depicts an economy where an increase in aggregate demand has caused inflation. Assume the government decides to conduct fiscal policy by changing taxes to bring inflation under control. Fiscal Policy 180 LRAS AS 160 140 120 100 AD, 80 60 AD 40 100 200 300 400 500 600 700 800 Real GDP (billions of dollars) istructions: Enter your answer as a whole number. If you are entering a negative number include a minus sign. Price Level
Transcribed Image Text:The graph below depicts an economy where an increase in aggregate demand has caused inflation. Assume the government decides to conduct fiscal policy by changing taxes to bring inflation under control. Fiscal Policy 180 LRAS AS 160 140 120 100 AD, 80 60 AD 40 100 200 300 400 500 600 700 800 Real GDP (billions of dollars) istructions: Enter your answer as a whole number. If you are entering a negative number include a minus sign. Price Level
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