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a. How much does aggregate demand need to change to restore the economy to its long-run equilibrium?        $  billion   b. If the MPC is 0.6, how much does government purchases need to change to shift aggregate demand by the amount you found in part a?        $  billion   Suppose instead that the MPC is 0.95.   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.

a. How much does aggregate demand need to change to restore the economy to its long-run equilibrium?        $  billion   b. If the MPC is 0.6, how much does government purchases need to change to shift aggregate demand by the amount you found in part a?        $  billion   Suppose instead that the MPC is 0.95.   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.

MACROECONOMICS
MACROECONOMICS
14th Edition
ISBN:9781337794985
Author:Baumol
Publisher:Baumol
Chapter11: Managing Aggregate Demand: Fiscal Policy
Section: Chapter Questions
Problem 1TY
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a. How much does aggregate demand need to change to restore the economy to its long-run equilibrium?

 

     $  billion

 

b. If the MPC is 0.6, how much does government purchases need to change to shift aggregate demand by the amount you found in part a?

 

     $  billion

 

Suppose instead that the MPC is 0.95.

 

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.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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