The graph below depicts an economy where a decline in aggregate demand has caused a recession. Assume the governmentdecides to conduct fiscal policy by changing taxes to reduce the burden of this recession.Fiscal PolicyPrice Level150LRASAS14013012011010090807060504030AD1AD0 80 160 240 320 400 480 560 640 720 800Real GDP (billions of dollars)Instructions: Enter your answer as a whole number. If you are entering a negative number Include a minus sign.a. How much does aggregate demand need to change to restore the economy to its long-run equilibrium?$billionb. If the MPC is 0.5, how much do taxes need to change to shift aggregate demand by the amount you found in part a?billionSuppose Instead that the MPC is 0.6.c. How much does aggregate demand and taxes need to change to restore the economy to its long-run equilibrium?Aggregate demand needs to change by $[ billion and taxes need to change by $[billion.

The impact of change in aggregate demand due to the change in government spending is more than that…

Answered: The graph below depicts an economy…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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What is the role of the Council Economic Advisers (CEA) as it relates to the effectiveness of the recent U.S. fiscal policy? Find the names and university affiliations of the present members of the CEA. (This may be a helpful website for finding sum of the information relating to the question. https://www.whitehouse.gov/cea/staff)
4 HOMEY set of any of yes to $30 -0- -o- My ly Suppose that for every increase in the sterest rate ens peresage the end of westmant spending decies by 565 bon Based on the anes the level of investments to b Suppose that for every increase in the interest rate of one percentage point, the level of investment spending declines by $0.5 billion. Based on the changes made to the money market in the previous scenario, the new interest rate causes the level of investment spending to by Taking the multiplier effect into account, the change in investment spending will cause the quantity of output demanded to known as the by at every price level. The impact of an increase in government purchases on the interest rate and the level of investment spending is effect. Use the purple line (diamond symbol) on the graph at the beginning of this problem to show the aggregate demand curve (ADS) after accounting for the impact of the increase in government purchases on the interest rate and the level of…
3. Budget balances and the national debt The following table lists federal expenditures, revenues, and GDP for the U.S. economy during several years. All numbers are in billions of dollars. Revenues Year (Billions of dollars) 1929 3.9 1948 1967 1986 2005 FEDERAL EXPENDITURES AND RE VENUES (Percent of GDP) 25 20 15 10 41.6 Plot the data for revenues and expenditures as a percentage of GDP on the following graph, rounded to the nearest percent. Use the orange points (square symbol) for expenditures and the green points (triangle symbol) for revenues. Line segments will automatically connect the points. 1929 148.8 769.2 2,153.9 Expenditures GDP (Billions of dollars) (Billions of dollars) 3.1 103.6 1948 29.8 157.5 990.4 2,472.2 1987 YEAR 1986 269.2 2005 832.6 4,462.8 12,421.9 Expenditures Δ Revenues ?
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An economy is in long-run macroeconomic equilibrium when each of the following aggregate demand shocks occurs. What kind of gap - inflationary or recessionary - will the economy face after the shock, and what type of fiscal policies would help move the economy back to potential output? How would your recommended fiscal policy shift the aggregate demandcurve? (Note: you do not need to draw anything).(a) A stock market boom increases the value of stocks held by households.(b) Firms come to believe that a recession in the near future is likely.(c) Anticipating the possibility of war, the government increases its purchases of military equipment.(d) The quantity of money in the economy declines and interest rates increase.
Consider an economy in which people spend 90 percent of each additional dollar of income they earn. If the government does easy (expansionary) fiscal policy via changing taxes by $2000, what will be the total effect on Y? Carefully follow all numeric instructions. Use a positive number (no sign) to show an increase in Y and a negative number (with negative sign) to show a decrease.
The question is based on the following information: Item R million 510 540 490 534 Total government revenue Total government expenditure Current government revenue Current government expenditure Non-interest expenditure Cyclically adjusted revenue Cyclically adjusted expenditure The current budget balance is R million. If the balance is negative indicate it using the minus sign in your answer for instance-32 Answer: 500 480 500
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The graph below depicts an economy where an increase in aggregate demand has caused inflation. Assume the government decides to conduct fiscal policy by decreasing government purchases to restore full-employment GDP. Price Level 180 160 140 120 100 80 60 40 20 0 Fiscal Policy LRAS AS AD AD, 100 200 300 400 500 600 700 800 900 1000 Real GDP (billions of dollars) Instructions: Enter your answer as a whole number. If you are entering a negative number include a minus sign. a. How much does aggregate demand need to change to restore the economy to its long-run equilibrium? $ (200) billion b. If the MPC is 0.75, how much does government purchases need to change to shift aggregate demand by the amount you found in part a? $ (50) → billion Suppose instead that the MPC is 0.6. c. How much does aggregate demand and government purchases need to change to restore the economy to its long-run equilibrium? Aggregate demand needs to change by $ (200) billion and government purchases need to change by…
Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
Fiscal policy: Fiscal policy refers to the use of government spending and taxation to influence the economy. In the case of a severe negative supply shock, the government may increase spending to stimulate demand and offset the reduction in supply. For example, the government may invest in infrastructure projects to create jobs and boost economic growth. However, this may lead to an increase in government borrowing and higher interest rates, which can offset the benefits of the fiscal stimulus. show this graphically please.
Now that the government's national debt has been growing for several years, investors have become worried that the government might default on its debt-that is, might refuse to pay back the investors. As a result, the investors are now willing to lend to the government only if they receive an interest rate of 10%. If the government runs a budget defict of $10 billion in 2019, the national debt will increase by 5 True or False: At the end of 2019, the government of Debtenburg will exceed the legal limit on how much it can borrow. True O False billion.

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