12. Using aggregate demand, short-run aggregate supply, and long-run aggregate supply curves, explain the process by which each of the following government policies will move the economy from one long-run macroeconomic equilibrium to another. Illustrate with diagrams. In each case, what are the short-run and long-run effects on the aggregate price level and aggre- gate output? a. There is an increase in taxes on households. b. There is an increase in the quantity of money. c. There is an increase in government spending.

12. Using aggregate demand, short-run aggregate supply, and long-run aggregate supply curves, explain the process by which each of the following government policies will move the economy from one long-run macroeconomic equilibrium to another. Illustrate with diagrams. In each case, what are the short-run and long-run effects on the aggregate price level and aggre- gate output? a. There is an increase in taxes on households. b. There is an increase in the quantity of money. c. There is an increase in government spending.

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter8: Macroeconomic Equilibrium: Aggregate Demand And Supply

Section: Chapter Questions

Problem 20E

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Question

12. Using aggregate demand, short-run aggregate supply,
and long-run aggregate supply curves, explain the
process by which each of the following government
policies will move the economy from one long-run
macroeconomic equilibrium to another. Illustrate with
diagrams. In each case, what are the short-run and
long-run effects on the aggregate price level and aggre-
gate output?
a. There is an increase in taxes on households.
b. There is an increase in the quantity of money.
c. There is an increase in government spending.

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