4 Canvas Mc Graw Hill HMW Fiscal Policy 1 3 points 01:04:40 Price Level 190 ezto.mheducation.com/ext/map/index.html?_con=con&external_browse Check my work mode: This shows what is The graph below depicts an economy where an increase in aggregate demand has caused inflation. Assume the government decides to conduct fiscal policy by decreasing government purchases to restore full-employment GDP. 160 LRAS 150 140 130 120 110 100 90 80 70 60 50 40 0 Fiscal Policy AD AS AD, 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 aggregate demand need to change to restore the economy to its long-run equilibrium? -160 billion b. If the MPC is 0.9, how much do government purchases need to change to shift aggregate demand by the amount you found in part a? billion Suppose instead that the MPC is 0.8. c. How much does aggregate demand and government purchases need to change to restore the economy to its long-run equilibrium? Aggregate demand needs to change by $ billion and government purchases need to change by $ billion. APR 25