An economy is experiencing a high rate of inflation. The government wants to reduce GDP by $80 billion to reduce inflationary pressure. The MPC is .8. By how much should the government raise taxes to achieve its objective?

Suppose the government decides to borrow money. The equilibrium interest rate will _____ and the total amount borrowed will _____

Country D experiences a recession due to a decrease in consumer confidence. There are two economists, Andrew and Betty. Betty suggests the government to do nothing. Andrew suggests the government to implement fiscal policies to revive the economy as soon as possible.   If the government adopts Betty’s policy, draw an AD-AS graph to show what happens to the economy in short run and then long run after the decrease in consumer confidence.   Suppose the government adopts Andrew’s policy. (i) Will the government increase or decrease spending? (ii) The government cuts the income tax rate. After cutting the income tax rate, the total income tax revenue collected increases. Explain why. (iii) Will Andrew’s policy be more effective if MPC is smaller?   Give one advantage of Betty’s policy over Andrew’s policy.

Suppose that an economy is in equilibrium at a level of output of $600 million. Suppose further that the full employment level output is $2000 million. What can the President along with Congress do in order to attain the full employment output? Group of answer choices Increase the taxes. Decrease the taxes. Sell government securities. Decrease the government spending.