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 equilbrium? %24 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? 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 $ billion and taxes need to change by $ billion.
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 equilbrium? %24 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? 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 $ billion and taxes need to change by $ billion.
Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter30: Government Budgets And Fiscal Policy
Section: Chapter Questions
Problem 30RQ: Under what general macroeconomic circumstances might a government use expansionary fiscal policy?...
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Question
2
Transcribed Image Text:Price Level
The graph below depicts an economy where a decline in aggregate demand has caused a recession. Assume the government
decides to conduct fiscal policy by changing taxes to reduce the burden of this recession.
Fiscal Policy
150
LRAS
140
AS
130
120
110
100
90
80
70
60
AD
50
40
AD,
30
80 160 240 320 400 480 560 640 720 800
Real GDP (billions of dollars)
Transcribed Image Text: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?
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?
bilion
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 $
billion and taxes need to change by $
billion.
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