Assuming the economy is in an initial equilibrium at X, identify where the new equilibrium will be if: Price level SRAS A P1 AD1 P2 AD AD2 Y2 Y Y1 There is a rise in public sector borrowing There is a rise in government government subsidies to the motor industry The government spends less on defence

ENGR.ECONOMIC ANALYSIS
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Chapter1: Making Economics Decisions
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Below graph these are 5 questions. Where equilibrium will shift to A or to B if :

  1. There is a rise in public sector borrowing
  2. There is a rise in government government subsidies to the motor industry
  3. The government spends less on defence
  4. The basic rate of income tax is raised
  5. The VAT rate is cut from 20%  to 15%.
Assuming the economy is in an initial equilibrium at X,
identify where the new equilibrium will be if:
Price
level
SRAS
A
P1
AD1
P2
AD
AD2
Y2
Y Y1
There is a rise in public sector borrowing
There is a rise in government government
subsidies to the motor industry
The government spends less on defence
The basic rate of income tax is raised
The VAT rate is cut from 20% to 15%.
P.
Transcribed Image Text:Assuming the economy is in an initial equilibrium at X, identify where the new equilibrium will be if: Price level SRAS A P1 AD1 P2 AD AD2 Y2 Y Y1 There is a rise in public sector borrowing There is a rise in government government subsidies to the motor industry The government spends less on defence The basic rate of income tax is raised The VAT rate is cut from 20% to 15%. P.
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