Suppose the full employment output level in this economy is $300 billion. In order to move the economy to full-employment output at the lowest possible price level, the aggregate demand curve must shift to the right by $80 billion at each price level. right/left 20/40/60/80 billion Use the green line (triangle symbols) to show the shift in aggregate demand necessary to return the economy to full employment. Then use the purple drop lines (diamond symbol) to show the macroeconomic equilibrium at full-employment output. Be sure the new aggregate demand curve (AD₂) is parallel to AD₁. You can click on AD₁ to see its slope. Suppose the government in this economy wants to enact fiscal policies that will shift the aggregate demand curve in the direction and magnitude you indicated. The marginal propensity to consume (MPC) in this economy is 0.8. This implies a spending multiplier of and a tax multiplier of 0/1.3/5/7 -9/-4/-2/-0.3 Consider each fiscal policy listed here. Which policies would shift the aggregate demand curve in a way that restores full-employment output at the lowest possible price level? Check all that apply. Decrease taxes by $25 billion and decrease government expenditures by $8 billion O Increase government expenditures by $80 billion and raise taxes by $80 billion Increase taxes by $20 billion Increase government expenditures by $24 billion and raise taxes by $10 billion. Increase government expenditures by $16 billion 00
Suppose the full employment output level in this economy is $300 billion. In order to move the economy to full-employment output at the lowest possible price level, the aggregate demand curve must shift to the right by $80 billion at each price level. right/left 20/40/60/80 billion Use the green line (triangle symbols) to show the shift in aggregate demand necessary to return the economy to full employment. Then use the purple drop lines (diamond symbol) to show the macroeconomic equilibrium at full-employment output. Be sure the new aggregate demand curve (AD₂) is parallel to AD₁. You can click on AD₁ to see its slope. Suppose the government in this economy wants to enact fiscal policies that will shift the aggregate demand curve in the direction and magnitude you indicated. The marginal propensity to consume (MPC) in this economy is 0.8. This implies a spending multiplier of and a tax multiplier of 0/1.3/5/7 -9/-4/-2/-0.3 Consider each fiscal policy listed here. Which policies would shift the aggregate demand curve in a way that restores full-employment output at the lowest possible price level? Check all that apply. Decrease taxes by $25 billion and decrease government expenditures by $8 billion O Increase government expenditures by $80 billion and raise taxes by $80 billion Increase taxes by $20 billion Increase government expenditures by $24 billion and raise taxes by $10 billion. Increase government expenditures by $16 billion 00
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Need help with this. Please show where to put AD2 and New Macro Eq and I provided you with possible answers for the last part. Thank you!
Transcribed Image Text:Suppose the full employment output level in this economy is $300 billion. In order to move the economy to full-employment output at the lowest
possible price level, the aggregate demand curve must shift to the right by $80 billion at each price level.
right/left
20/40/60/80 billion
Use the green line (triangle symbols) to show the shift in aggregate demand necessary to return the economy to full employment. Then use the purple
drop lines (diamond symbol) to show the macroeconomic equilibrium at full-employment output. Be sure the new aggregate demand curve (AD₂) is
parallel to AD₁. You can click on AD₁ to see its slope.
Suppose the government in this economy wants to enact fiscal policies that will shift the aggregate demand curve in the direction and magnitude you
indicated. The marginal propensity to consume (MPC) in this economy is 0.8. This implies a spending multiplier of
and a tax multiplier of
0/1.3/5/7
-9/-4/-2/-0.3
Consider each fiscal policy listed here. Which policies would shift the aggregate demand curve in a way that restores full-employment output at the lowest
possible price level? Check all that apply.
O Decrease taxes by $25 billion and decrease government expenditures by $8 billion
O Increase government expenditures by $80 billion and raise taxes by $80 billion
U Increase taxes by $20 billion
O Increase government expenditures by $24 billion and raise taxes by $10 billion
O Increase government expenditures by $16 billion
Transcribed Image Text:The following graph shows aggregate demand (AD) and aggregate supply (AS) curves for a hypothetical economy.
PRICE LEVEL (CPI)
140
135
130
125
120
115
110
105
100
95
90
200 220 240
AS
AD
260 280 300 320 340
REAL GDP (Billions of dollars)
360 380 400
AD
New Macro Eq
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