On the following graph, AD1 represents the initial aggregate demand curve in a hypothetical economy, and AS represents the initial aggregate supply curve. The economy's full-employment output is $12 trillion. On the following graph, use the grey point (star symbol) to mark the equilibrium. (Note: You will not be graded on any adjustments made to the graph.) PRICE LEVEL (CPI) AS 106 105 104 103 63 102 101 100 99 98 AD AD 吕 1 97 96 Full Employment 96 6 7 8 9 10 11 12 13 14 15 16 REAL GDP (Trillions of dollars) AD 2 Equilibrium The initial short-run equilibrium level of real GDP is $ trillion, and the initial short-run equilibrium price level is Suppose the government, seeking full employment, borrows money and increases its expenditures by the amount it believes necessary to close the The initial short-run equilibrium level of real GDP is $ trillion, and the initial short-run equilibrium price level is Suppose the government, seeking full employment, borrows money and increases its expenditures by the amount it believes necessary to close the output gap. According to critics of Keynesian fiscal policy, the government policy may result in complete crowding out. Which of the following aggregate demand curves shown in the previous graph would be consistent with complete crowding out? AD1 AD2 AD3 As a result, the equilibrium level of real GDP will be $ trillion, and the equilibrium price level will be According to critics of Keynesian fiscal policy, which of the following is true in this case? The increase in deficit-financed government spending causes real GDP to increase to full-employment output. Real GDP does not increase; only the price level increases. The increase in deficit-financed government spending causes real GDP to increase, but not to full-employment output. The increase in deficit-financed government spending has no impact on real GDP and the price level.
On the following graph, AD1 represents the initial aggregate demand curve in a hypothetical economy, and AS represents the initial aggregate supply curve. The economy's full-employment output is $12 trillion. On the following graph, use the grey point (star symbol) to mark the equilibrium. (Note: You will not be graded on any adjustments made to the graph.) PRICE LEVEL (CPI) AS 106 105 104 103 63 102 101 100 99 98 AD AD 吕 1 97 96 Full Employment 96 6 7 8 9 10 11 12 13 14 15 16 REAL GDP (Trillions of dollars) AD 2 Equilibrium The initial short-run equilibrium level of real GDP is $ trillion, and the initial short-run equilibrium price level is Suppose the government, seeking full employment, borrows money and increases its expenditures by the amount it believes necessary to close the The initial short-run equilibrium level of real GDP is $ trillion, and the initial short-run equilibrium price level is Suppose the government, seeking full employment, borrows money and increases its expenditures by the amount it believes necessary to close the output gap. According to critics of Keynesian fiscal policy, the government policy may result in complete crowding out. Which of the following aggregate demand curves shown in the previous graph would be consistent with complete crowding out? AD1 AD2 AD3 As a result, the equilibrium level of real GDP will be $ trillion, and the equilibrium price level will be According to critics of Keynesian fiscal policy, which of the following is true in this case? The increase in deficit-financed government spending causes real GDP to increase to full-employment output. Real GDP does not increase; only the price level increases. The increase in deficit-financed government spending causes real GDP to increase, but not to full-employment output. The increase in deficit-financed government spending has no impact on real GDP and the price level.
Chapter13: Inflation
Section: Chapter Questions
Problem 19SQ
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Question
Transcribed Image Text:On the following graph, AD1 represents the initial aggregate demand curve in a hypothetical economy, and AS represents the initial aggregate supply
curve. The economy's full-employment output is $12 trillion.
On the following graph, use the grey point (star symbol) to mark the equilibrium. (Note: You will not be graded on any adjustments made to the
graph.)
PRICE LEVEL (CPI)
AS
106
105
104
103
63
102
101
100
99
98
AD
AD
吕
1
97
96
Full Employment
96
6
7
8
9
10
11
12
13
14
15
16
REAL GDP (Trillions of dollars)
AD
2
Equilibrium
The initial short-run equilibrium level of real GDP is $
trillion, and the initial short-run equilibrium price level is
Suppose the government, seeking full employment, borrows money and increases its expenditures by the amount it believes necessary to close the
Transcribed Image Text:The initial short-run equilibrium level of real GDP is $
trillion, and the initial short-run equilibrium price level is
Suppose the government, seeking full employment, borrows money and increases its expenditures by the amount it believes necessary to close the
output gap. According to critics of Keynesian fiscal policy, the government policy may result in complete crowding out. Which of the following
aggregate demand curves shown in the previous graph would be consistent with complete crowding out?
AD1
AD2
AD3
As a result, the equilibrium level of real GDP will be $
trillion, and the equilibrium price level will be
According to critics of Keynesian fiscal policy, which of the following is true in this case?
The increase in deficit-financed government spending causes real GDP to increase to full-employment output.
Real GDP does not increase; only the price level increases.
The increase in deficit-financed government spending causes real GDP to increase, but not to full-employment output.
The increase in deficit-financed government spending has no impact on real GDP and the price level.
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