Managerial Economics: A Problem Solving Approach
5th Edition
ISBN: 9781337106665
Author: Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher: Cengage Learning
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Chapter 17, Problem 7MC
To determine
Calculate the probability.
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Short Description
Fiscal Policy
Graph Details
Shown is a Fiscal Policy diagram with the variable Real GDP (billions of dollars) on the x-axis and the variable Price Level on the y-axis.
The x-axis is scaled from 0 to 800 billion dollars with an increment of 40 billion dollars, and the y-axis is scaled from 30 to 150 units with an increment of 5 units.
Object Details
On the graph we have:Four Line Objects:An upward sloping Aggregate Supply, AS line with two endpoints:Point 1 at (160, 70)Point 2 at (720, 140)A downward sloping Aggregate Demand, AD1 line with two endpoints:Point 1 at (80, 110)Point 2 at (640, 40)A vertical Long-run Aggregate Supply, LRAS with two endpoints:Point 1 at (400, 145)Point 2 at (400, 30)A downward sloping Aggregate Demand, AD line with two endpoints:Point 1 at (720, 60)Point 2 at (160, 130)Two Reference Points:Lines AS, AD, and LRAS intersect at (400, 100)Lines AS and AD1 intersect at (280, 85)
a. How much does aggregate demand need to change to restore the…
Fiscal Policy
Graph Details
Shown is a Fiscal Policy diagram with the variable Real GDP (billions of dollars) on the x-axis and the variable Price Level on the y-axis.
The x-axis is scaled from 0 to 1000 billion dollars with an increment of 50 billion dollars, and the y-axis is scaled from 0 to 180 units with an increment of 10 units.
Object Details
On the graph we have:Four Line Objects:An upward sloping Aggregate Supply, AS line with two endpoints:Point 1 at (200, 40)Point 2 at (800, 160)A downward sloping Aggregate Demand, AD line with two endpoints:Point 1 at (200, 160)Point 2 at (800, 40)A downward sloping Aggregate Demand, AD1 line with two endpoints:Point 1 at (350, 170)Point 2 at (900, 60)A vertical Long-run Aggregate Supply, LRAS line with two endpoints:Point 1 at (500, 170)Point 2 at (500, 0)Two Reference Points:Lines AS and AD1 intersect at (600, 120)Lines AS, AD, and LRAS intersect at (500, 100)
a. How much does aggregate demand need to change to restore the…
a. How much does aggregate demand need to change to restore the economy to its long-run equilibrium?
$ billion
b. If the MPC is 0.6, how much does government purchases need to change to shift aggregate demand by the amount you found in part a?
$ billion
Suppose instead that the MPC is 0.95.
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 $ billion and government purchases need to change by $ billion.
Chapter 17 Solutions
Managerial Economics: A Problem Solving Approach
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