Suggest a policy that could resolve each macroeconomic disequilibrium to a long-run, full-employment equilibrium. Demonstrate the expansionary or contractionary policy's effect on each graph. Be explicit about how the policy will affect the economy's price level and t total output (rGDP). Demand-side fiscal policies Price LRASI Level K Price Level Price Loyol POSRAS LRAS/ Potential GOD AD LRAS/ Potential rGDP SRAS AD rGDP SRAS AD rGDP Supply-side fiscal policies Monetary policies Price LRAS/ Level, Potential GOP Price LRAS/ Level, Potential GOP Price LRAS/ Level, Potential SRAS AD GOP SRAS AD GDP SRAS AD rGDP

Suggest a policy that could resolve each macroeconomic disequilibrium to a long-run, full-employment equilibrium. Demonstrate the expansionary or contractionary policy's effect on each graph. Be explicit about how the policy will affect the economy's price level and t total output (rGDP). Demand-side fiscal policies Price LRASI Level K Price Level Price Loyol POSRAS LRAS/ Potential GOD AD LRAS/ Potential rGDP SRAS AD rGDP SRAS AD rGDP Supply-side fiscal policies Monetary policies Price LRAS/ Level, Potential GOP Price LRAS/ Level, Potential GOP Price LRAS/ Level, Potential SRAS AD GOP SRAS AD GDP SRAS AD rGDP

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter24: Fiscal Policy

Section: Chapter Questions

Problem 5P

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consider each fiscal policy listed here, which policies would shift the aggregate demand curve in the way that restores full employment output at the lowest possible price level check all that apply. Cut taxes by 60 billion. Decrease taxes by 80 billion and decrease government expenditures by 20 billion Increase government expenditures by 50 billion and raise taxes five40 billio Increase government expenditures by 60 billion and raise taxes by 60 Reduce government expenditures by 30 billion
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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 Instructions: Enter your answer as a whole number. If you are entering a negatlve number Include a minus sign. a. How much does aggregate demand need to change to restore the economy to its long-run equilibrilum? $, billion b. If the MPC is 0.6 , 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 0.8 . c. How much does aggregate demand and taxes need to change to restore the economy to Its long-run equilibrlum? Aggregate demand needs to change by $ billion and taxes need to change by $ billion.
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Real Private Investment (ex invei Real Government Investment Private investment per capita Government investment per capita 25,229 8,557 29,539 9,127 32,242 9,567 32,933 11,338 33,478 9,975 36,303 10,519 31,871 11,642 27,013 12,186 28,194 12,480 30,985 12,166 34,489 11,073 37,642 12,221 41,117 12,779 42,866 13,109 44,298 13,097 47,167 14,372 50,723 14,334 51,385 14,512
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