Answered: Price Level 10 9 8 -7 6 ရာ 3 2 1 1 2 3…

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

Consider the following AD/AS diagram of the macroeconomy, with LRAS shown as the vertical curve, AD as the downward sloping curve, and SRAS as the upward sloping curve.

First, place a point at the current equilibrium. Then, suppose the government wants to stimulate the economy to restore it to long-run equilibrium by cutting taxes. Draw a new curve that shows the impact of this policy change. (You'll have to determine which, but draw it so that it reflects a parallel, vertical shift in one of the existing curves. Make sure that it's the same size as the ones shown here using the segment tool.) Finally, place a point at the new equilibrium using the point tool.

Price Level
10
9
00
Tonn
7
5
3
2
4
40
Segment
2
11
6
Real GDP Thillionsl
Unido
00
nedo
10

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