Instructions: Enter your answer as a whole number. If you are entering a negative number include a minus sign. 0. How much does aggregate demand need to change to restore the economy to its long-run equilibrium? billion b. If the MPC is 0.667, how much do taxes need to change to shift aggregate demand by the amount you found in part a? billion Suppose insteed that the MPC is 0.5. C. How much does aggregate demand and taxes need to change to restore the economy to its long-run equilibrium? Aggregate demand needs to chenge 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. 0. How much does aggregate demand need to change to restore the economy to its long-run equilibrium? billion b. If the MPC is 0.667, how much do taxes need to change to shift aggregate demand by the amount you found in part a? billion Suppose insteed that the MPC is 0.5. C. How much does aggregate demand and taxes need to change to restore the economy to its long-run equilibrium? Aggregate demand needs to chenge by $ ] billion and taxes need to change by $[ billion.
Chapter24: Fiscal Policy
Section: Chapter Questions
Problem 5P
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Question
Transcribed Image Text:The graph below depicts an economy where a decline in aggregate demand has caused a recession. Assume the government
decides to conduct fiscal policy by changing toxes to reduce the burden of this recession.
Fiscal Policy
140
LRAS
AS
130
120
110
100
90
80
70
AD
60
50
AD,
40
80 160 240 320 400 480 560 640 720 800
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 oggregate demanci need to change to restore the economy to its long-run equilbrilum?
billion
b. If the MPC is 0.667, how much do taxes need to change to shift aggregate demand by the amount you found in part a?
billion
Suppose instead that the MPC is 0.5.
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.
Price Level
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