Assume that the economy is currently producing at its potential output. Suppose the government decided to increase taxes to rein in consumer spending, but everything else in the economy remained the same. On the following graph, shift the aggregate demand curve (AD), the short-run aggregate supply curve (SRAS), or both to show the intended short-run effect of this fiscal policy on the economy. Note: Select and drag one or both of the curves to the desired position. Curves will snap into position, so if you try to move a curve and it snaps back to its original position, just drag it a little farther. PRICE LEVEL SRAS AD 1 SRAS

Assume that the economy is currently producing at its potential output. Suppose the government decided to increase taxes to rein in consumer spending, but everything else in the economy remained the same. On the following graph, shift the aggregate demand curve (AD), the short-run aggregate supply curve (SRAS), or both to show the intended short-run effect of this fiscal policy on the economy. Note: Select and drag one or both of the curves to the desired position. Curves will snap into position, so if you try to move a curve and it snaps back to its original position, just drag it a little farther. PRICE LEVEL SRAS AD 1 SRAS

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

CENGAGE MINDTAP
Aplia Homework: Fiscal Policy
Assume that the economy is currently producing at its potential output. Suppose the government decided to increase taxes to rein in consumer
spending, but everything else in the economy remained the same.
On the following graph, shift the aggregate demand curve (AD), the short-run aggregate supply curve (SRAS), or both to show the intended short-run
effect of this fiscal policy on the economy.
Note: Select and drag one or both of the curves to the desired position. Curves will snap into position, so if you try to move a curve and it snaps back
to its original position, just drag it a little farther.
PRICE LEVEL
MAR
7
K
Aa O
SRAS
AD
[115
13
AD
T
SRAS
11,095
MA
zoom W

mail ▸YouTube
Maps Translate
CENGAGE MINDTAP
ng.cengage.com/static/nb/ui/evo/index.html?deploymentid=5832642473087890871996572291&eISBN=9781337915601&id=19950380
Aplia Homework: Fiscal Policy
PRICE LEVEL
C
Tap - Cengage Learning X
SRAS
X
AD
REAL GDP
O
AD
0
SRAS
To the extent that unemployment insurance helps maintain the incomes of laid-off workers, it acts as
discretionary fiscal policy necessary in order to bring the economy back to its potential output.
, which makes

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The following graph plots an aggregate demand curve. Using the graph, shift the aggregate demand curve to depict the impact that a tax hike has on the economy. Suppose the governments of two very similar economies, economy N and economy M, implement a tax cut of equal size. The tax cut in economy N is permanent, while the tax cut in economy M is temporary. The economies are otherwise completely identical. The tax cut will have a larger impact on aggregate demand in the economy with the (temporary tax cut/permanent tax cut) .
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14. Crowding out On the following graph, AD₁ represents the initial aggregate demand curve in a hypothetical economy, and AS represents the initial aggregate supply curve. The economy's full-employment output is $12 trillion. On the following graph, use the grey point (star symbol) to mark the equilibrium. (Note: You will not be graded on any adjustments made to the graph.) PRICE LEVEL (CPI) 106 105 104 103 102 101 100 99 98 97 96 6 7 8 1 1 1 11 AS AD₁ Full Employment 9 10 11 REAL GDP (Trillions of dollars) 12 13 14 15 AD₂ AD 3 16 Equilibrium ?