ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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YEAR | POTENTIAL |
REAL GDP | PRICE LEVEL |
---|---|---|---|
2020 | $1500 billion | $1500 billion | 100 |
2021 | $1590 billion | $1560 billion | 105 |
Refer to the table above to answer the questions below:
a) Explain whether a contractionary or an expansionary fiscal or
b) Based on you answer to part a) above, identity one monetary and fiscal policy instrument.
c) If the economy is successful in keeping real GDP at its potential level in 2021, state whether each of the following will be higher, lower, or the same if this economy had taken no action.
i Real GDP
ii Potential GDP
iii The inflation rate
iv The
d) Now let us suppose that real GDP in 2021 was higher than the potential GDP in 2021. What would your answer to part a) and part b) be under this scenario?
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