The graph below depicts an economy where an increase in aggregate demand has caused inflation. Assume the government decidesto conduct fiscal policy by changing taxes to bring inflation under control.Price Level1801601401201008060400Fiscal PolicyLRASADASReal GDP (billions of dollars)AD₁100 200 300 400 500 600 700 800Instructions: 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?$ (300) ► billionb. If the MPC is 0.667, 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 0.75.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 $ (300) billion and taxes need to change by $ 100 billion.

A government generally regulates the market through fiscal measures, the measures can be of two…

The graph below depicts an economy where an increase in aggregate demand has caused inflation. Assume the government decides to conduct fiscal policy by changing taxes to bring inflation under control. Price Level 180 160 140 120 100 80 60 8 0 Fiscal Policy LRAS AS AD₁ 100 200 300 400 500 600 700 800 Real GDP (billions of dollars) Instructions: Enter your answer as a whole number. If you are entering a negative number include a minus sign. 8. How much does aggregate demand need to change to restore the economy to its long-run equilibrium? $ (300) billion b. If the MPC is 0.667, how much do taxes need to change to shift aggregate demand by the amount you found in part a? $ billion Suppose instead that the MPC is 0.75. 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 $ (300) billion and taxes need to change by $ 100 → billion.

The graph below depicts an economy where an increase in aggregate demand has caused inflation. Assume the government decides to conduct fiscal policy by changing taxes to bring inflation under control. Price Level 180 160 140 120 100 80 60 8 0 Fiscal Policy LRAS AS AD₁ 100 200 300 400 500 600 700 800 Real GDP (billions of dollars) Instructions: Enter your answer as a whole number. If you are entering a negative number include a minus sign. 8. How much does aggregate demand need to change to restore the economy to its long-run equilibrium? $ (300) billion b. If the MPC is 0.667, how much do taxes need to change to shift aggregate demand by the amount you found in part a? $ billion Suppose instead that the MPC is 0.75. 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 $ (300) billion and taxes need to change by $ 100 → billion.

Macroeconomics: Principles and Policy (MindTap Course List)

13th Edition

ISBN:9781305280601

Author:William J. Baumol, Alan S. Blinder

Publisher:William J. Baumol, Alan S. Blinder

Chapter6: How Statisticians Measure Inflation

Section6.A: How Statisticians Measure Inflation

Problem 6TY

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