Use the graph below to answer questions 6 and 7.AggregatepricelevelP₁LRASYE6. a) If the economy is at point E₁, there is a(n)"high" or "low")Y₁AD₁SRASb) What is expected to happen to the economy in the long run?Real GDPgap with (high low) unemployment. (Circle7. If the economy is at point E1, the appropriate fiscal policy in order to stabilize output is to:increase taxes and decrease government spending (thereby decreases AD, shifting AD left).decrease taxes and increase government spending (thereby increasing AD, shifting AD right).A)B)

The inflationary gap defines the difference between the real GDP and the GDP of the economy at its…

Use the graph below to answer questions 6 and 7. Aggregate price level LRAS YF 6. a) If the economy is at point Et, there is a(n) "high" or "low") Y, AD₁ SRAS b) What is expected to happen to the economy in the long run? gap Real GDP with (high low) unemployment. (Cir 7. If the economy is at point E1, the appropriate fiscal policy in order to stabilize output is to: increase taxes and decrease government spending (thereby decreases AD, shifting AD left). decrease taxes and increase government spending (thereby increasing AD, shifting AD right). A) B)

Use the graph below to answer questions 6 and 7. Aggregate price level LRAS YF 6. a) If the economy is at point Et, there is a(n) "high" or "low") Y, AD₁ SRAS b) What is expected to happen to the economy in the long run? gap Real GDP with (high low) unemployment. (Cir 7. If the economy is at point E1, the appropriate fiscal policy in order to stabilize output is to: increase taxes and decrease government spending (thereby decreases AD, shifting AD left). decrease taxes and increase government spending (thereby increasing AD, shifting AD right). A) B)

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter11: Managing Aggregate Demand: Fiscal Policy

Section: Chapter Questions

Problem 1TY

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