(b) Assume that the household in an economy spend 75% of their extra income.Calculate the change of aggregate demand if government increase their spending by$150,000.(c) If prices keep rising, a nightmare scenario for the US economy is a real possibilityNew York (CNN Business) There's no denying it: Inflation is here. Consumer pricessurged 7% over the past year. Housing prices have continued to soar, too. But thequestion on the minds of many economists and Wall Street strategists is whethersomething even worse could be in the cards: prices rising as the economy slows.Source: CNN Business, 12" January 2022.Examine the cause of stagflation, and how it affects the output and price level.(d)Based on part (c), what will happen to the output and price level if the USpolicymakers accommodate the shift in aggregate supply? State only one fiscalpolicy tool that the policymakers may use.

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(b) Assume that the household in an economy spend 75% of their extra income. Calculate the change of aggregate demand if government increase their spending by $150,000.

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

(b) Assume that the household in an economy spend 75% of their extra income.
Calculate the change of aggregate demand if government increase their spending by
$150,000.
(c) If prices keep rising, a nightmare scenario for the US economy is a real possibility
New York (CNN Business) There's no denying it: Inflation is here. Consumer prices
surged 7% over the past year. Housing prices have continued to soar, too. But the
question on the minds of many economists and Wall Street strategists is whether
something even worse could be in the cards: prices rising as the economy slows.
Source: CNN Business, 12" January 2022.
Examine the cause of stagflation, and how it affects the output and price level.
(d)
Based on part (c), what will happen to the output and price level if the US
policymakers accommodate the shift in aggregate supply? State only one fiscal
policy tool that the policymakers may use.

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