Refer to the figure below: Price Level (average price) AS PE PF E₂ E₁ AD Gap AD Excess 5.8 6.0 6.2 AD 2 1 QF Real Output (trillions of dollars per year) If the marginal propensity to consume was 0.83, 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
Refer to the figure below: Price Level (average price) AS PE PF E₂ E₁ AD Gap AD Excess 5.8 6.0 6.2 AD 2 1 QF Real Output (trillions of dollars per year) If the marginal propensity to consume was 0.83, 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
Chapter11: Managing Aggregate Demand: Fiscal Policy
Section: Chapter Questions
Problem 2TY
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Transcribed Image Text:Refer to the figure below:
Price Level (average price)
AS
PE
PF
E₂
E₁
AD
Gap
AD Excess
5.8
6.0
6.2
AD 2
1
QF
Real Output (trillions of dollars per year)
If the marginal propensity to consume was 0.83, 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
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