Consider the following diagram, in which the current short-run equilibrium is at point A. a. At point A, the economy has an inflationary gap b. If the marginal propensity to consume equals 0.5, to eliminate the gap, the government should decrease spending by $ trillion. (Round your answer to two decimal places.) Price Level 122 118 114 0+ 0 LRAS 22 22.8 23.6 Real GDP per Year ($ trillion) SRAS AD

Consider the following diagram, in which the current short-run equilibrium is at point A. a. At point A, the economy has an inflationary gap b. If the marginal propensity to consume equals 0.5, to eliminate the gap, the government should decrease spending by $ trillion. (Round your answer to two decimal places.) Price Level 122 118 114 0+ 0 LRAS 22 22.8 23.6 Real GDP per Year ($ trillion) SRAS AD

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter11: Managing Aggregate Demand: Fiscal Policy

Section: Chapter Questions

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