1. Fiscal Policya. Assume the Economy has an inflationary gap with above average price level, demonstrate this graphically and explain label the short run gdp with A.b. If the US has an MPC of 75% and the government decides to increase spending on social programs by $150 billion, what will happen to GDP (Y) and Price level (P) in the Short Run? Demonstrate and Explain. Label this point B.c. What Fiscal Policy should the Government implement (why?)? What Choices do they have? What will be the effects of this policy on the GDP? Demonstrate and Fully explain (hint: explain the steps as outlined in class)
1. Fiscal Policya. Assume the Economy has an inflationary gap with above average price level, demonstrate this graphically and explain label the short run gdp with A.b. If the US has an MPC of 75% and the government decides to increase spending on social programs by $150 billion, what will happen to GDP (Y) and Price level (P) in the Short Run? Demonstrate and Explain. Label this point B.c. What Fiscal Policy should the Government implement (why?)? What Choices do they have? What will be the effects of this policy on the GDP? Demonstrate and Fully explain (hint: explain the steps as outlined in class)
Chapter24: Fiscal Policy
Section: Chapter Questions
Problem 5P
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1. Fiscal Policy
a. Assume the Economy has an inflationary gap with above average price level, demonstrate this graphically and explain label the short run
b. If the US has an MPC of 75% and the government decides to increase spending on social programs by $150 billion, what will happen to GDP (Y) and Price level (P) in the Short Run? Demonstrate and Explain. Label this point B.
c. What Fiscal Policy should the Government implement (why?)? What Choices do they have? What will be the effects of this policy on the GDP? Demonstrate and Fully explain (hint: explain the steps as outlined in class)
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