Price Leve100908070605040300ADAD₁80 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?-320 billionb. If the MPC is 0.8, how much do taxes need to change to shift aggregate demand by the amount you found in part a?80 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 $1 ] billion and taxes need to change by $1 billion.

Long run aggregate supply (LRAS) curve is vertical at the potential level of output. Long-run…

. How much does aggregate demand need to chang $ 320 billion b. If the MPC is 0.8, how much do taxes need to chan- $ 80 billion Suppose instead that the MPC is 0.6. c. How much does aggregate demand and taxes nee-

. How much does aggregate demand need to chang $ 320 billion b. If the MPC is 0.8, how much do taxes need to chan- $ 80 billion Suppose instead that the MPC is 0.6. c. How much does aggregate demand and taxes nee-

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter24: The Aggregate Demand/aggregate Supply Model

Section: Chapter Questions

Problem 6SCQ: Suppose concerns about the size of the federal budget deficit lead the U.S. Congress to cut all...

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Question

Price Leve
100
90
80
70
60
50
40
30
0
AD
AD₁
80 160 240 320 400 480 560 640 720 800
Real GDP (billions of dollars)
Instructions: Enter your answer as a whole number. If you are entering a negative number include a minus sign.
a. How much does aggregate demand need to change to restore the economy to its long-run equilibrium?
-320 billion
b. If the MPC is 0.8, how much do taxes need to change to shift aggregate demand by the amount you found in part a?
80 billion
Suppose 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 $1 ] billion and taxes need to change by $1 billion.

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