nsider a hypothetical economy in which the marginal propensity to consume (MPC) is 0.5. The following graph shows the aggregate demand curves ( ₁ and AD2), the short-run aggregate supply curve (SRAS), and the long-run aggregate supply curve (LRAS). The economy is currently at point A. PRICE LEVEL 140 136 132 128 124 120 116 112 108 400 500 LRAS AD₁ AD₂ SRAS 124 600 700 800 REAL GDP (Billions of dollars) 900 1000 1100 1200 (?)

nsider a hypothetical economy in which the marginal propensity to consume (MPC) is 0.5. The following graph shows the aggregate demand curves ( ₁ and AD2), the short-run aggregate supply curve (SRAS), and the long-run aggregate supply curve (LRAS). The economy is currently at point A. PRICE LEVEL 140 136 132 128 124 120 116 112 108 400 500 LRAS AD₁ AD₂ SRAS 124 600 700 800 REAL GDP (Billions of dollars) 900 1000 1100 1200 (?)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Aa 1

°blank one options (expansionary, recessionary)

°blank two options (decrease, increase)

Consider a hypothetical economy in which the marginal propensity to consume (MPC) is 0.5. The following graph shows the aggregate demand curves (
AD₁ and AD₂), the short-run aggregate supply curve (SRAS), and the long-run aggregate supply curve (LRAS). The economy is currently at point A.
PRICE LEVEL
140
136
132
128
124
120
116
112
108
400
500
A
LRAS
AD₁
SRAS 124
AD 2
600 700 800 900 1000 1100 1200
REAL GDP (Billions of dollars)
?

The economy is currently experiencing
gap of $
In order to close this gap, one option would be for the government to
taxes do not change).
billion.
government purchases by $
billion (assuming net

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