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Refer to the figure below: Price Level (average price) a Gap AD Excess AD AD 5.8 6.0 6.2 Real Output (trillions of dollars per year) If the marginal propensity to consume was 0.65, how large would each of the following need to be in order to restore full-employment equilibrium? Instructions: Round your responses to one decimal place. a. A tax increase $ billion b. A government spending cut $ billion. c. A cut in income transfers $ billion

Refer to the figure below: Price Level (average price) a Gap AD Excess AD AD 5.8 6.0 6.2 Real Output (trillions of dollars per year) If the marginal propensity to consume was 0.65, how large would each of the following need to be in order to restore full-employment equilibrium? Instructions: Round your responses to one decimal place. a. A tax increase $ billion b. A government spending cut $ billion. c. A cut in income transfers $ billion

MACROECONOMICS
MACROECONOMICS
14th Edition
ISBN:9781337794985
Author:Baumol
Publisher:Baumol
Chapter11: Managing Aggregate Demand: Fiscal Policy
Section: Chapter Questions
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Refer to the figure below: Price Level (average price) a Gap AD Excess AD AD 5.8 6.0 6.2 Real Output (trillions of dollars per year) If the marginal propensity to consume was 0.65, how large would each of the following need to be in order to restore full-employment equilibrium? Instructions: Round your responses to one decimal place. a. A tax increase $ billion b. A government spending cut $ billion. c. A cut in income transfers $ billion
Transcribed Image Text:Refer to the figure below: Price Level (average price) a Gap AD Excess AD AD 5.8 6.0 6.2 Real Output (trillions of dollars per year) If the marginal propensity to consume was 0.65, how large would each of the following need to be in order to restore full-employment equilibrium? Instructions: Round your responses to one decimal place. a. A tax increase $ billion b. A government spending cut $ billion. c. A cut in income transfers $ billion
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