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? billion b. If the MPC is 0.75, how much do taxes need to change to shift aggregate demand by the amount you found in part a? $1 Suppose instead that the MPC is 0.6. 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 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? billion b. If the MPC is 0.75, how much do taxes need to change to shift aggregate demand by the amount you found in part a? $1 Suppose instead that the MPC is 0.6. 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 billion and taxes need to change by $ billion.
Chapter15: Macroeconomic Viewpoints: New Keynesian, Monetarist, And New Classical
Section: Chapter Questions
Problem 4E
Related questions
Question
![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?
billion
b. If the MPC is 0.75, how much do taxes need to change to shift aggregate demand by the amount you found in
part a?
$1
billion
Suppose instead that the MPC is 0.6.
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 $1
billion.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F5a1d79ee-47b5-4f59-9c91-ef88ab29a561%2F2d51527c-96f8-4433-b587-31c31c02e24f%2F1y95q5i_processed.jpeg&w=3840&q=75)
Transcribed Image Text: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?
billion
b. If the MPC is 0.75, how much do taxes need to change to shift aggregate demand by the amount you found in
part a?
$1
billion
Suppose instead that the MPC is 0.6.
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 $1
billion.
![7
ts
eBook
ferences
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.
Price Level
180
160
140
120
100
80
60
40
0
Fiscal Policy
LRAS
AD
AS
AD₁
100 200 300 400 500 600 700 800
Real GDP (billions of dollars)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F5a1d79ee-47b5-4f59-9c91-ef88ab29a561%2F2d51527c-96f8-4433-b587-31c31c02e24f%2Fjc6xlgh_processed.jpeg&w=3840&q=75)
Transcribed Image Text:7
ts
eBook
ferences
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.
Price Level
180
160
140
120
100
80
60
40
0
Fiscal Policy
LRAS
AD
AS
AD₁
100 200 300 400 500 600 700 800
Real GDP (billions of dollars)
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