The graph below depicts an economy where an increase in aggregate demand has caused inflation. Assume the government decidesto conduct fiscal policy by changing taxes to bring inflation under control.Price LevelFiscal Policy16015014013012011010090807060504080 160 240 320 400 480 560 640 720 800LRASReal GDP (billions of dollars)ASAD₁AD 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?40 x billionb. If the MPC is 0.80, how much do taxes need to change to shift aggregate demand by the amount you found in part a?8 x billionSuppose instead that the MPC is 0.67.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 $8 ✩ billion and taxes need to change by $40billion.

Aggregate Demand:Aggregate demand is the total demand for goods and services within an economy at a…

The graph below depicts an economy where an increase in aggregate demand has caused inflation. Assume the government decides to conduct fiscal policy by changing taxes to bring inflation under control. LRAS 150 140 130 120 110 K 100 90 80 70 60 Price Level Fiscal Policy 160 AS AD₁ AD 50 40 80 160 240 320 400 480 560 640 720 800

The graph below depicts an economy where an increase in aggregate demand has caused inflation. Assume the government decides to conduct fiscal policy by changing taxes to bring inflation under control. LRAS 150 140 130 120 110 K 100 90 80 70 60 Price Level Fiscal Policy 160 AS AD₁ AD 50 40 80 160 240 320 400 480 560 640 720 800

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter24: Fiscal Policy

Section: Chapter Questions

Problem 6P

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Imagine that the government statisticians who calculate the inflation rate have been updating the basic basket of goods once every 10 years, but now they decide to update it every five years. How will this Change affect the amount of substitution bias and quality/new goods bias?
Suppose concerns about the size of the federal budget deficit lead the U.S. Congress to cut all funding for research and development for ten years. Assuming this has an impact on technology growth, what does the AD/AS model predict would be the likely effect on equilibrium GDP and the price level?
Suppose the Federal Reserve begins to Increase the supply of money at an Increasing rate. What Impact would that have on GDP, unemployment, and inflation?
7 ts eBook ferences The graph below depicts an economy where an increase in aggregate demand has caused inflation. Assume the government decides to conduct fiscal policy by changing taxes to bring inflation under control. Price Level 180 160 140 120 100 80 60 40 0 Fiscal Policy LRAS AD AS AD₁ 100 200 300 400 500 600 700 800 Real GDP (billions of dollars)
options:a contractionary fiscala contractionary monetarya recessionaryan expansionary fiscalan expansionary monetary an inflationaryequal to greater thangrew inflationless thanrecededthe same asunemployment
Illustrate each of the following situations with a graphshowing AS and AD curves, and explain what happensto the equilibrium values of the price level and aggregateoutput:a. A decrease in G with the money supply held constant bythe Fedb. A decrease in the price of oil with no change ingovernment spendingc. An increase in Z with no change in governmentspendingd. An increase in the price of oil and a decrease in G
O upp.eduiastic.com/student/ássessment/6081aea8213e430008f3ad18/class/611d518243c10fo0099843cf/uta/619b8b17a411c ols.org bookmarks e Your Eighty Dollar…. sds Question 22/28 > NEXT I BOOKMARK Supply-side egonomists argue that Supply and secure economic prosperity. on businesses (or producers) are the surest way to increase Aggregate A Tax cuts B Tax increases Spending cuts D Spending increases DELL & 7 8 9. 1 4. W e r y W # 个

The graph below depicts an economy where an increase in aggregate demand has caused Inflation. Assume the government decides to conduct fiscal policy by changing taxes to bring Inflation under control. Price Level 160 150 140 130 120 110 100 90 80 70 60 50 Fiscal Policy LRAS AS Real GDP (billions of dollars) AD₁ AD 40 80 160 240 320 400 480 560 640 720 800 Instructions: Round your answers to 2 decimal places. 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 0.75, 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 0.5. 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.
The government increase its spending by $100. 1. Explain the effect of this change in government expenditure on AD 2.Explain the effect of this change on the short run equliibrumoutput and inflation
There is currently a political and academic controversy whether or not stimulus packagesagainst the Covid-induced economic recession will cause inflation. Professor OlivierBlanchard has warned that the stimulus package of the US-administration may lead toinflation in the US. However, he does not see inflation dangers emanating from stimulusprograms in the Eurozone. The Next Generation EU program is not only considered to be a stimulus program but also tobe a growth program, which by spending on infrastructure and climate-related investmentsis expected to lead to an increase in potential output.Analyze in an AD-AS model the impact of economic growth on actual GDP and the pricelevel. Also elaborate on the role that an additional demand stimulus could play.
Congratulationst You have been appointed an economic policy adviser to the United States, You are told that the economy is significantly abowe futtemplyoment GDP. Based on this inlormation, how can the economy would adjust to reach LR.SR Equilbrium (Classical View)? The economy wilt experience low unemployment rate, pushing wages up, and increasing the pelces of a key input (labor). shatting the sAS to the left (up). The economy will experience high unemployment rate, pushing wages down, and reducing the prices of a key input (labor). shiting the SAS to the right (down). The econoriny wil experience low unemployment rate, decreasing inceme, which will eventually shift the AD to the left. The eooncmy will experience low unemployment rate, pushing wages up, and increasing the prices of a key input (labor), shiting the sAs to the night (down).
Consider an economy with the following aggregate demand (AD) and aggregate supply (AS) schedules. These schedules reflect the fact that, prior to the period we're examining, deci- sion makers entered into contracts and made choices antici- 105* pating that the price level would be P. SRAS 105 (IN TRILLIONS) AD105 PRICE LEVEL (In TRILLIONS) 95 $3.5 $5.1 4.9 100 3.8 4.7 105 4.2 4.5 110 4.5 4.3 115 4.8 a. Indicate the quantity of GDP that will be produced and the price level that will emerge during this period. b. Is the economy in long-run equilibrium? Why or why not? c. How will the unemployment rate during the current period compare with this economy's natural rate of unemployment?