Suppose the full employment output level in this economy is $320 billion. In order to move the economy to full-employment output at the lowest possible price level, the aggregate demand curve must shift to the at each price level. by Use the green line (triangle symbols) to show the shift in aggregate demand necessary to return the economy to full employment. Then use the purple drop lines (diamond symbol) to show the macroeconomic equilibrium at full-employment output. Be sure the new aggregate demand curve (AD₂) is parallel to AD₁. You can click on AD, to see its slope. Suppose the government in this economy wants to enact fiscal policies that will shift the aggregate demand curve in the direction and magnitude you indicated. The marginal propensity to consume (MPC) in this economy is 0.50. This implies a spending multiplier of and a tax multiplier of Consider each fiscal policy listed here. Which policies would shift the aggregate demand curve in a way that restores full-employment output at the lowest possible price level? Check all that apply. Cut taxes by $60 billion Decrease taxes by $80 billion and decrease government expenditures by $20 billion Increase government expenditures by $60 billion and raise taxes by $60 billion Reduce government expenditures by $30 billion Increase government expenditures by $50 billion and raise taxes by $40 billion
Suppose the full employment output level in this economy is $320 billion. In order to move the economy to full-employment output at the lowest possible price level, the aggregate demand curve must shift to the at each price level. by Use the green line (triangle symbols) to show the shift in aggregate demand necessary to return the economy to full employment. Then use the purple drop lines (diamond symbol) to show the macroeconomic equilibrium at full-employment output. Be sure the new aggregate demand curve (AD₂) is parallel to AD₁. You can click on AD, to see its slope. Suppose the government in this economy wants to enact fiscal policies that will shift the aggregate demand curve in the direction and magnitude you indicated. The marginal propensity to consume (MPC) in this economy is 0.50. This implies a spending multiplier of and a tax multiplier of Consider each fiscal policy listed here. Which policies would shift the aggregate demand curve in a way that restores full-employment output at the lowest possible price level? Check all that apply. Cut taxes by $60 billion Decrease taxes by $80 billion and decrease government expenditures by $20 billion Increase government expenditures by $60 billion and raise taxes by $60 billion Reduce government expenditures by $30 billion Increase government expenditures by $50 billion and raise taxes by $40 billion
Chapter20: Aggregate Demand And Supply
Section: Chapter Questions
Problem 8SQP
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Transcribed Image Text:The following graph shows aggregate demand (AD) and aggregate supply (AS) curves for a hypothetical economy.
PRICE LEVEL
140
135
130
125
120
115
110
105
100
95
90
AS
AD.
200 220 240 260 280 300 320 340 360 380 400
REAL GDP (Billions of dollars)
AD2
New Macro Eq
(?
Transcribed Image Text:Suppose the full employment output level in this economy is $320 billion. In order to move the economy to full-employment output at the lowest
possible price level, the aggregate demand curve must shift to the
by
at each price level.
Use the green line (triangle symbols) to show the shift in aggregate demand necessary to return the economy to full employment. Then use the purple
drop lines (diamond symbol) to show the macroeconomic equilibrium at full-employment output. Be sure the new aggregate demand curve (AD₂) is
parallel to AD₁. You can click on AD, to see its slope.
Suppose the government in this economy wants to enact fiscal policies that will shift the aggregate demand curve in the direction and magnitude you
indicated. The marginal propensity to consume (MPC) in this economy is 0.50. This implies a spending multiplier of
▼ and tax multiplier of
Consider each fiscal policy listed here. Which policies would shift the aggregate demand curve in a way that restores full-employment output at the
lowest possible price level? Check all that apply.
Cut taxes by $60 billion
Decrease taxes by $80 billion and decrease government expenditures by $20 billion
Increase government expenditures by $60 billion and raise taxes by $60 billion
Reduce government expenditures by $30 billion
Increase government expenditures by $50 billion and raise taxes by $40 billion
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