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Price Level The economy of Morin is shown in the figure below. 170 150 130 The Economy of Morin AD 110 90 90 (485, 110) 70 460 480 500 520 540 560 580 600 Real GDP AS a. If potential GDP (LAS) is $565, and the economy is presently in equilibrium, then there is a(n) [recessionary gap of $45 billion. b. In order to close this gap aggregate demand must Increase by $40 billion. c. If every $1 change in government spending leads to a $4 change in aggregate demand, government spending must Increase by $15 billion. d. Suppose that initially government had a balanced budget. If government increases its spending as in part (c) and tax revenues are 0.2 of real GDP, what will be the government's real budget surplus/deficit at full-employment equilibrium? The government budget would have a [deficit of $ billion.

Price Level The economy of Morin is shown in the figure below. 170 150 130 The Economy of Morin AD 110 90 90 (485, 110) 70 460 480 500 520 540 560 580 600 Real GDP AS a. If potential GDP (LAS) is $565, and the economy is presently in equilibrium, then there is a(n) [recessionary gap of $45 billion. b. In order to close this gap aggregate demand must Increase by $40 billion. c. If every $1 change in government spending leads to a $4 change in aggregate demand, government spending must Increase by $15 billion. d. Suppose that initially government had a balanced budget. If government increases its spending as in part (c) and tax revenues are 0.2 of real GDP, what will be the government's real budget surplus/deficit at full-employment equilibrium? The government budget would have a [deficit of $ billion.

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Price Level The economy of Morin is shown in the figure below. 170 150 130 The Economy of Morin AD 110 90 90 (485, 110) 70 460 480 500 520 540 560 580 600 Real GDP AS a. If potential GDP (LAS) is $565, and the economy is presently in equilibrium, then there is a(n) [recessionary gap of $45 billion. b. In order to close this gap aggregate demand must Increase by $40 billion. c. If every $1 change in government spending leads to a $4 change in aggregate demand, government spending must Increase by $[ 15 billion. d. Suppose that initially government had a balanced budget. If government increases its spending as in part (c) and tax revenues are 0.2 of real GDP, what will be the government's real budget surplus/deficit at full-employment equilibrium? The government budget would have a [deficit of $ billion.
Transcribed Image Text:Price Level The economy of Morin is shown in the figure below. 170 150 130 The Economy of Morin AD 110 90 90 (485, 110) 70 460 480 500 520 540 560 580 600 Real GDP AS a. If potential GDP (LAS) is $565, and the economy is presently in equilibrium, then there is a(n) [recessionary gap of $45 billion. b. In order to close this gap aggregate demand must Increase by $40 billion. c. If every $1 change in government spending leads to a $4 change in aggregate demand, government spending must Increase by $[ 15 billion. d. Suppose that initially government had a balanced budget. If government increases its spending as in part (c) and tax revenues are 0.2 of real GDP, what will be the government's real budget surplus/deficit at full-employment equilibrium? The government budget would have a [deficit of $ billion.
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