70 460 480 500 520 540 560 580 600 Real GDP a. If potential GDP (LAS) IS $580, and the economy is presently in equilibrium, then there is a(n) recessionary gap of $ 60 billion, b. In order to close this gap aggregate demand must Increase by $ 60 billion. c. If every $1 change in government spending leads to a $4 change in aggregate demand, government spending must increase by $ 15 billion. d. Suppose that Initially government had a balanced budget. If government Increases Its spending as In part (c) and tax revenues are 0.25 of real GDP, what will be the government's real budget surplus/deficit at full-employment equillbrium? The government budget would have a deficit of $ 45 billion.
70 460 480 500 520 540 560 580 600 Real GDP a. If potential GDP (LAS) IS $580, and the economy is presently in equilibrium, then there is a(n) recessionary gap of $ 60 billion, b. In order to close this gap aggregate demand must Increase by $ 60 billion. c. If every $1 change in government spending leads to a $4 change in aggregate demand, government spending must increase by $ 15 billion. d. Suppose that Initially government had a balanced budget. If government Increases Its spending as In part (c) and tax revenues are 0.25 of real GDP, what will be the government's real budget surplus/deficit at full-employment equillbrium? The government budget would have a deficit of $ 45 billion.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
Please solve this with the explanation.
Q4. The economy of Morin is shown in the figure below.
![The Economy of Morin
AD
AS
170
150
130
110
90
70
460
480
500
520
540
560
580
600
Real GDP
a. If potential GDP (LAS) Is $580, and the economy is presently in equilibrlum, then there is a(n) recessionary
v gap of $
60 billion.
b. In order to close this gap aggregate demand must increase by $ 60 billion.
c. If every $1 change in government spending leads to a $4 change in aggregate demand, government spending must increase by $
15 billion.
d. Suppose that Iinitially government had a balanced budget. If government increases Its spending as In part (C) and tax revenues are
0.25 of real GDP, what will be the government's real budget surplus/deficit at full-employment equillbrium?
The government budget would have a deficit
of $
45 billion.
Price Level](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fd829cb31-0ca8-4ff6-b02f-a2ae981c3ef7%2F12faa12e-76b5-4d2c-a678-a56b14e454bd%2Fn9cq02h_processed.jpeg&w=3840&q=75)
Transcribed Image Text:The Economy of Morin
AD
AS
170
150
130
110
90
70
460
480
500
520
540
560
580
600
Real GDP
a. If potential GDP (LAS) Is $580, and the economy is presently in equilibrlum, then there is a(n) recessionary
v gap of $
60 billion.
b. In order to close this gap aggregate demand must increase by $ 60 billion.
c. If every $1 change in government spending leads to a $4 change in aggregate demand, government spending must increase by $
15 billion.
d. Suppose that Iinitially government had a balanced budget. If government increases Its spending as In part (C) and tax revenues are
0.25 of real GDP, what will be the government's real budget surplus/deficit at full-employment equillbrium?
The government budget would have a deficit
of $
45 billion.
Price Level
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