ces Refer to the table below. Real Output Demanded, Original, Billions $506 508 510 512 514 Price Level 110 105 percent 100 95 90 Decrease Real Output Supplied, Billions Suppose that aggregate demand increases such that the amount of real output demanded rises by $7 billion at each price level. Instructions: Enter your answers as a whole number. a. By what percentage will the price level increase? billion $ 513 512 510 507 502 Will this inflation be demand-pull inflation, or will it be cost-push inflation? Demand-pull inflation ✓ b. If potential real GDP (that is, full-employment GDP) is $510 billion, what will be the size of the positive GDP gap after the change in aggregate demand? $ c. If government wants to use fiscal policy to counter the resulting inflation without changing tax rates, would it increase government spending or decrease it?

ces Refer to the table below. Real Output Demanded, Original, Billions $506 508 510 512 514 Price Level 110 105 percent 100 95 90 Decrease Real Output Supplied, Billions Suppose that aggregate demand increases such that the amount of real output demanded rises by $7 billion at each price level. Instructions: Enter your answers as a whole number. a. By what percentage will the price level increase? billion $ 513 512 510 507 502 Will this inflation be demand-pull inflation, or will it be cost-push inflation? Demand-pull inflation ✓ b. If potential real GDP (that is, full-employment GDP) is $510 billion, what will be the size of the positive GDP gap after the change in aggregate demand? $ c. If government wants to use fiscal policy to counter the resulting inflation without changing tax rates, would it increase government spending or decrease it?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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