6. A government spends $50,000 as an expansionary fiscal policy. It pays this money to a vendor who sells its product for $50 each. (Assume the spending multiplier is 1, so we can ignore it.) a. If prices are completely fixed, then the firm's output will increase by: b. If prices are flexible and increase to $100, then the firm's output will increase by: c. Which will have a have a bigger impact on real GDP? (a. or b.) d. Which will have a bigger impact on unemployment? (a. or b.)

6. A government spends $50,000 as an expansionary fiscal policy. It pays this money to a vendor who sells its product for $50 each. (Assume the spending multiplier is 1, so we can ignore it.) a. If prices are completely fixed, then the firm's output will increase by: b. If prices are flexible and increase to $100, then the firm's output will increase by: c. Which will have a have a bigger impact on real GDP? (a. or b.) d. Which will have a bigger impact on unemployment? (a. or b.)

Principles of Microeconomics

7th Edition

ISBN:9781305156050

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter6: Supply, Demand And Government Policies

Section: Chapter Questions

Problem 5PA

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Comparative Advantage and Absolute Advantage Analysis

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6. A government spends $50,000 as an expansionary fiscal policy. It pays this money to a vendor
who sells its product for $50 each. (Assume the spending multiplier is 1, so we can ignore it.)
a. If prices are completely fixed, then the firm's output will increase by:
b. If prices are flexible and increase to $100, then the firm's output will increase by:
c. Which will have a have a bigger impact on real GDP? (a. or b.)
d. Which will have a bigger impact on unemployment? (a. or b.)

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