The graph below depicts an economy where an increase in aggregate demand has caused inflation. Assume the government decides to conduct fiscal policy by decreasing government purchases to restore full-employment GDP. 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? $ -160 Numeric ResponseEdit Unavailable. -160 incorrect. billion b. If the MPC is 0.9, how much do government purchases need to change to shift aggregate demand by the amount you found in part a? $ billion Suppose instead that the MPC is 0.8. c. How much does aggregate demand and government purchases need to change to restore the economy to its long-run equilibrium? Aggregate demand needs to change by $ billion and government purchases need to change by $ billion. 4CanvasMcGrawHillHMW Fiscal Policy13points01:04:40Price Level190ezto.mheducation.com/ext/map/index.html?_con=con&external_browseCheck my work mode: This shows what isThe graph below depicts an economy where an increase in aggregate demand has caused inflation. Assume the government decidesto conduct fiscal policy by decreasing government purchases to restore full-employment GDP.160LRAS1501401301201101009080706050400Fiscal PolicyADASAD,80 160 240 320 400 480 560 640 720 800Real 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 aggregate demand need to change to restore the economy to its long-run equilibrium?-160 billionb. If the MPC is 0.9, how much do government purchases need to change to shift aggregate demand by the amount you found in parta?billionSuppose instead that the MPC is 0.8.c. How much does aggregate demand and government purchases need to change to restore the economy to its long-run equilibrium?Aggregate demand needs to change by $billion and government purchases need to change by $billion.APR25

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Answered: 4 Canvas Mc Graw Hill HMW Fiscal Policy…

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter11: Managing Aggregate Demand: Fiscal Policy

Section: Chapter Questions

Problem 2TY

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The graph below depicts an economy where an increase in aggregate demand has caused inflation. Assume the government decides to conduct fiscal policy by decreasing government purchases to restore full-employment GDP. 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? $ -160 Numeric ResponseEdit Unavailable. -160 incorrect. billion b. If the MPC is 0.9, how much do government purchases need to change to shift aggregate demand by the amount you found in part a? $ billion Suppose instead that the MPC is 0.8. c. How much does aggregate demand and government purchases need to change to restore the economy to its long-run equilibrium? Aggregate demand needs to change by $ billion and government purchases need to change by $ billion.