In the above figures, supposed that there is no import or proportional tax. To pull the economy back to the long-run equilibrium, the government can increase spending by $ trillion. 1) 1 2) 2 3) 8 4) 4 Price level (GDP deflator, 2000 = 100)16015014013012004LASADSAS81216 20 24Real GDP (trillions of 2000 dollars) Real GDP(dollars)102030405060Consumptionexpenditure (dollars)22.53037.54552.560

Marginal propensity to consume (MPC) measures the change in consumption expenditure due to a change…

In the above figures, supposed that there is no import or proportional tax. To pull the economy back to the long-run equilibrium, the government can increase spending by $ trillion. 1) 1 2) 2 3) 8 4) 4

In the above figures, supposed that there is no import or proportional tax. To pull the economy back to the long-run equilibrium, the government can increase spending by $ trillion. 1) 1 2) 2 3) 8 4) 4

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

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Question

In the above figures, supposed that there is no import or proportional tax. To pull the economy back to the long-run equilibrium, the government can increase spending by $ trillion.

Price level (GDP deflator, 2000 = 100)
160
150
140
130
120
0
4
LAS
AD
SAS
8
12
16 20 24
Real GDP (trillions of 2000 dollars)

Real GDP
(dollars)
10
20
30
40
50
60
Consumption
expenditure (dollars)
22.5
30
37.5
45
52.5
60

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Step 1: Define MPC and government spending multiplier.

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Step 2: Calculate the MPC and government spending multiplier.

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Step 3: Calculate the change in government spending.

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