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Economics (MindTap Course List)

13th Edition
Roger A. Arnold
Publisher: Cengage Learning
ISBN: 9781337617383
BuyFind

Economics (MindTap Course List)

13th Edition
Roger A. Arnold
Publisher: Cengage Learning
ISBN: 9781337617383

Solutions

Chapter
Section
Chapter 16, Problem 10QP
Textbook Problem

Suppose the government undertakes an expansionary fiscal policy measure that raises aggregate demand but individuals incorrectly anticipate the measure, bias upward. What will the short- and long-run changes be in the price level and Real GDP?

Expert Solution
To determine

The short-run and long-run effects of expansionary fiscal policy.

Explanation of Solution

An expansionary fiscal policy adopted by the government makes a rightward shift in the aggregate demand curve through the increase in public expenditure. If the economy is in long-run equilibrium at the initial level, then the rightward shift in aggregate demand curve is less than the leftward shift in the short-run aggregate supply curve...

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Chapter 16 Solutions

Economics (MindTap Course List)
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