Price Level 150 130 110 90- 70 460 480 500 520 540 560 580 600 Real GDP a. If potential GDP (LAS) is $545, and the economy is presently in equilibrium, then there is a(n) recessionary billion. b. In order to close this gap aggregate demand must increase by $ 25 billion. gap of $ 25 c. If every $1 change in government spending leads to a $4 change in aggregate demand, government spending must increase by $ 6.25 billion. d. Suppose that initially government had a balanced budget. If government increases its spending as in part (c) and tax revenues are 0.2 of real GDP, what will be the government's real budget surplus/deficit at full-employment equilibrium? The government budget would have a deficit of $ 6.24 billion.
Price Level 150 130 110 90- 70 460 480 500 520 540 560 580 600 Real GDP a. If potential GDP (LAS) is $545, and the economy is presently in equilibrium, then there is a(n) recessionary billion. b. In order to close this gap aggregate demand must increase by $ 25 billion. gap of $ 25 c. If every $1 change in government spending leads to a $4 change in aggregate demand, government spending must increase by $ 6.25 billion. d. Suppose that initially government had a balanced budget. If government increases its spending as in part (c) and tax revenues are 0.2 of real GDP, what will be the government's real budget surplus/deficit at full-employment equilibrium? The government budget would have a deficit of $ 6.24 billion.
Chapter11: Managing Aggregate Demand: Fiscal Policy
Section11.A: Graphical Treatment Of Taxes And Fiscal Policy
Problem 2TY
Related questions
Question
AI-Generated Solution
AI-generated content may present inaccurate or offensive content that does not represent bartleby’s views.
Unlock instant AI solutions
Tap the button
to generate a solution
Recommended textbooks for you
Principles of Economics 2e
Economics
ISBN:
9781947172364
Author:
Steven A. Greenlaw; David Shapiro
Publisher:
OpenStax
Principles of Economics 2e
Economics
ISBN:
9781947172364
Author:
Steven A. Greenlaw; David Shapiro
Publisher:
OpenStax