6.The graph below depicts an economy where a decline in aggregate demand has caused a recession. Assume the governmentdecides to conduct fiscal policy by changing taxes to reduce the burden of this recession.Fiscal Policy140LRASAS130120110100908070AD6050AD,4080 160 240 320 400 480 560 640 720 800Real GDP (billions of dollars)Instructions: Enter your answer as a whole number. If you are entering a negative number include a minus sign.a. How much does aggregate demand need to change to restore the economy to its long-run equilibrium?24billionb. If the MPC is 0.8, how much do taxes need to change to shift aggregate demand by the amount you found in part a?Price Level E 807060AD50AD14080 160 240 320 400 480 560 640 720 800Real GDP (billions of dollars)Instructions: Enter your answer as a whole number. If you are entering a negative number include a minus sign.a. How much does aggregate demand need to change to restore the economy to its long-run equilibrium?24billionb. If the MPC is 0.8, how much do taxes need to change to shift aggregate demand by the amount you found in part a?$4billionSuppose instead that the MPC is 0.75.c. How much does aggregate demand and taxes need to change to restore the economy to its long-run equilibrium?Aggregate demand needs to change by $billion and taxes need to change by $billion.

AD has to increase by (480 - 400) = $80 billion.

Instructions: Enter your answer as a whole number. If you are entering a negative number include a minus sign. a. How much does aggregate demand need to change to restore the economy to its long-run equilibrium? $ billion b. If the MPC is 0.8, how much do taxes need to change to shift aggregate demand by the amount you found in part a? $4 billion Suppose instead that the MPC is 0.75. c. How much does aggregate demand and taxes need to change to restore the economy to its long-run equilibrium? Aggregate demand needs to change by $ billion and taxes need to change by $ billion.

Instructions: Enter your answer as a whole number. If you are entering a negative number include a minus sign. a. How much does aggregate demand need to change to restore the economy to its long-run equilibrium? $ billion b. If the MPC is 0.8, how much do taxes need to change to shift aggregate demand by the amount you found in part a? $4 billion Suppose instead that the MPC is 0.75. c. How much does aggregate demand and taxes need to change to restore the economy to its long-run equilibrium? Aggregate demand needs to change by $ billion and taxes need to change by $ billion.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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