Instructions: Enter your answer as a whole number. If you are entering a negative number include a minus sign. 0. How much does aggregate demand need to change to restore the economy to its long-run equilibrium? billion b. If the MPC is 0.667, how much do taxes need to change to shift aggregate demand by the amount you found in part a? billion Suppose insteed 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 chenge 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. 0. How much does aggregate demand need to change to restore the economy to its long-run equilibrium? billion b. If the MPC is 0.667, how much do taxes need to change to shift aggregate demand by the amount you found in part a? billion Suppose insteed 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 chenge by $ ] billion and taxes need to change by $[ billion.
Chapter11: Fiscal Policy
Section: Chapter Questions
Problem 1.7P
Related questions
Question
![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 toxes to reduce the burden of this recession.
Fiscal Policy
140
LRAS
AS
130
120
110
100
90
80
70
AD
60
50
AD,
40
80 160 240 320 400 480 560 640 720 800
Real GDP (billions of dollars)
Instructions: Enter your answer as a whole number. If you are entering a negative number include a minus sign.
a. How much does oggregate demanci need to change to restore the economy to its long-run equilbrilum?
billion
b. If the MPC is 0.667, 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.
Price Level](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fd4aab49f-f8a3-4463-87ab-e1c45d2e080f%2Fef32925d-323c-4351-98ff-2ffd121a560c%2Fgacgxy2e_processed.jpeg&w=3840&q=75)
Transcribed Image Text: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 toxes to reduce the burden of this recession.
Fiscal Policy
140
LRAS
AS
130
120
110
100
90
80
70
AD
60
50
AD,
40
80 160 240 320 400 480 560 640 720 800
Real GDP (billions of dollars)
Instructions: Enter your answer as a whole number. If you are entering a negative number include a minus sign.
a. How much does oggregate demanci need to change to restore the economy to its long-run equilbrilum?
billion
b. If the MPC is 0.667, 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.
Price Level
Expert Solution
![](/static/compass_v2/shared-icons/check-mark.png)
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
![ECON MACRO](https://www.bartleby.com/isbn_cover_images/9781337000529/9781337000529_smallCoverImage.gif)
![Principles of Economics 2e](https://www.bartleby.com/isbn_cover_images/9781947172364/9781947172364_smallCoverImage.jpg)
Principles of Economics 2e
Economics
ISBN:
9781947172364
Author:
Steven A. Greenlaw; David Shapiro
Publisher:
OpenStax
![Survey Of Economics](https://www.bartleby.com/isbn_cover_images/9781337111522/9781337111522_smallCoverImage.gif)
![ECON MACRO](https://www.bartleby.com/isbn_cover_images/9781337000529/9781337000529_smallCoverImage.gif)
![Principles of Economics 2e](https://www.bartleby.com/isbn_cover_images/9781947172364/9781947172364_smallCoverImage.jpg)
Principles of Economics 2e
Economics
ISBN:
9781947172364
Author:
Steven A. Greenlaw; David Shapiro
Publisher:
OpenStax
![Survey Of Economics](https://www.bartleby.com/isbn_cover_images/9781337111522/9781337111522_smallCoverImage.gif)