Consider an economy that is operating below the full-employment level of real GDP. What would be the effect of an increase in government spending on aggregate demand and real GDP?
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Consider an economy that is operating below the full-employment level of real GDP. What would be the effect of an increase in government spending on aggregate demand and real GDP?
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- What level of spending will be needed to move the economy to full employment?Suppose real GDP is currently $12.5 trillion and potential real GDP is $13 trillion. If the president and Congress increased government purchases by $500 billion, what would be the result on the economy?How do you recommend the government change GDP and taxes to stabilize the economy in each of the following scenarios? Economic growth has started slowing and the unemployment rate has increased over the past four months. There has been strong growth in GDP over the past year, unemployment is very low, and inflation has started to rise. Prices are stable, unemployment is low and the economy is growing at an average rate.
- Two countries are in a recession. Country A has an MPC of 0.8 and Country B has an MPC of 0.6. In which country will government spending have the greatest impact?If MPC is = 0.6 and government spending decreases by dollar 100 billion, what happens to equilibrium GDP.Current GDP increases relative to potential GDP if and only if aggregate demand exceeds current GDP?
- If the economy is experiencing unemployment, the most appropriate government action to shift the aggregate demand curve to the right would be:Differentiate the macroeconomic effects that explain the causes of the differences of government spending in aggregate demand.List pros and cons of government spending. Can government spending be shown on the IS model or the aggregate demand model?
- True or False If spending exceeds output, real GDP will decline as firms cut back on production.In February 2021, retail sales fell by 3.3% compared to January. What does the drop in retail sales indicate about how consumption has changed? Investment spending fell by 2.2% in February. How will these changes affect aggregate expenditures? How will equilibrium GDP be affected? How do you think the stimulus checks that many Americans will receive will affect consumption? How will that affect aggregate expenditures and GDP and employment? Do you expect the change in aggregate expenditures be temporary or permanent? Part of the stimulus package passed by Biden includes an extra $300 per week in unemployment benefits. Do you agree with the stimulus checks and additional $300 per week in unemployment benefits? Why or why not?The government of a country decides to double its current level of spending, causing real GDP to increase from $20,000 to $120, 000. What is the percent change in real GDP?
