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 toxes 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 oggregate demanci need to change to restore the economy to its long-run equilbrilum?billionb. If the MPC is 0.667, how much do taxes need to change to shift aggregate demand by the amount you found in part a?billionSuppose instead that the MPC is 0.5.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.Price Level

The recession means that the economy would result in the output which is less than the long run…

Instructions: Enter your answer as a whole number. If you are entering a negative number include a minus sign. 0. How much does aggregate demand need to change to restore the economy to its long-run equilibrium? billion b. If the MPC is 0.667, how much do taxes need to change to shift aggregate demand by the amount you found in part a? billion Suppose insteed that the MPC is 0.5. C. How much does aggregate demand and taxes need to change to restore the economy to its long-run equilibrium? Aggregate demand needs to chenge 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. 0. How much does aggregate demand need to change to restore the economy to its long-run equilibrium? billion b. If the MPC is 0.667, how much do taxes need to change to shift aggregate demand by the amount you found in part a? billion Suppose insteed that the MPC is 0.5. C. How much does aggregate demand and taxes need to change to restore the economy to its long-run equilibrium? Aggregate demand needs to chenge 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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Using the model of aggregate demand–aggregate supply to illustrate the traditional view,graphically compare the short-run and long-run impact of debt-financed tax cuts on:a. output.b. prices.
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Price Level p* a LRAS Y* AD Real GDP AS Tools Fiscal Action 0 a. How does the short-run equilibrium compare to the initial equilibrium? The price level has (Click to select) and output has [(Click to select) b. What is the primary concern of policy makers under these conditions? high unemployment O declining value of the dollar O high Inflation V c. What policy action might the government take in order to improve economic conditions? (Click to select) fiscal policy by [(Click to select) taxes and/or (Click to select)government purchases d. Use the graph above to depict the goal of the fiscal action discussed Instructions: Use the tool provided 'Fiscal Action' to show the result of the policy action taken by the government. Plot only the endpoints of the line (2 points total). Label your line appropriately. e. What is the desired final outcome after the fiscal policy action and multiplier effect have occurred? A price level [(Click to select) P* and an output level [(Click to select) Y*…
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Consider the economy represented by the aggregate demand aggregate supply (AD-AS) graph shown, where output is below full employment output (Y*) and unemployment is above the natural rate. To move out of a recession, the government should decrease taxes and increase government spending. increase taxes and decrease government spending. O decrease taxes and government spending. increase taxes and government spending. Adjust the graph to reflect the result of this policy action. Price level (P) Real GDP (Y) LRAS AD SRAS
Use the model of aggregate demand ang aggregate supply in explaining the impact of government's decision to increase government spending. Determine what will happen to the long run and short run levels of prices and output.
10- Base on the aggregate demand-aggregate supply model, in the long-run, an increase in export sales would cause output to …. and the price level to …. A- rise, rise B- rise, stay constant C- fall, stay constant D- stay constant, rise
Assume that a hypothetical economy with an MPC of 0.8 is experiencing severe recession Instructions: In part around your answers to 2 decimal places. Enter your answers as positive numbers in part enter your answers as whole numbers. a. By how much would government spending have to rise to shift the aggregate demand curve rightwerd by 50 S 10.00 bilion How large a tax cut would be needed to achieve the same increase in aggregate demand? $ 13 billion b. Determine one possible combination of government spending increases and tax increases that would accomplish the same goal without changing the amount of outstanding debt e, maintaining the budget balance at its current value) billion Increase spending by Increase taxes by bilion Save & Ext
A. Assume that a hypothetical economy with an MPC of .75 is experiencing severe recession. By how much would government spending have to rise to shift the aggregate demand curve rightward by $70 billion? B. How large a tax cut would be needed to achieve the same increase in aggregate demand?
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