Macroeconomics (7th Edition)
7th Edition
ISBN: 9780134738314
Author: R. Glenn Hubbard, Anthony Patrick O'Brien
Publisher: PEARSON
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Chapter 13, Problem 13.3.9PA
To determine
The reason why
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Suppose that Shen, an economist from a research facility in Washington, and Valerie, another economist from an
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The graph below depicts an economy where a decline in aggregate demand has caused a recession. Assume the government
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Fiscal Policy
Price Level
150
LRAS
AS
140
130
120
110
100
90
80
70
60
50
40
30
AD1
AD
0 80 160 240 320 400 480 560 640 720 800
Real 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?
$
billion
b. If the MPC is 0.5, how much do taxes need to change to shift aggregate demand by the amount you found in part a?
billion
Suppose Instead that the MPC is 0.6.
c. How much does aggregate demand and taxes need to change to restore the economy to its long-run equilibrium?
Aggregate demand needs to change by $[ billion and taxes need to change by $[
billion.
The graph below depicts an economy where a decline in aggregate demand has caused a recession. Assume the government
decides to conduct fiscal policy by changing taxes to reduce the burden of this recession.
Fiscal Policy
Price Level
140
130
120
110
100
90
80
70
60
50
LRAS
$
AS
AD₁
40
0 80 160 240 320 400 480 560 640 720 800
Real GDP (billions of dollars)
billion
AD
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?
$
b. If the MPC is 0.6, how much do taxes need to change to shift aggregate demand by the amount you found in part a?
billion
Suppose instead that the MPC is 0.92
c How much does aggregate demand and taxes need to change to restore the economy to its long-run equilibrium?
Aggregate demand needs to change by S
billion and taxes need to change by $[
billion.
Chapter 13 Solutions
Macroeconomics (7th Edition)
Ch. 13 - Prob. 13.1.1RQCh. 13 - Prob. 13.1.2RQCh. 13 - Prob. 13.1.3RQCh. 13 - Prob. 13.1.4PACh. 13 - Prob. 13.1.5PACh. 13 - Prob. 13.1.6PACh. 13 - Prob. 13.1.7PACh. 13 - Prob. 13.1.8PACh. 13 - Prob. 13.1.9PACh. 13 - Prob. 13.1.10PA
Ch. 13 - Prob. 13.2.1RQCh. 13 - Prob. 13.2.2RQCh. 13 - Prob. 13.2.4RQCh. 13 - Prob. 13.2.5RQCh. 13 - Prob. 13.2.6PACh. 13 - Prob. 13.2.7PACh. 13 - Prob. 13.2.8PACh. 13 - Prob. 13.2.9PACh. 13 - An article in the Economist noted that the...Ch. 13 - Prob. 13.2.11PACh. 13 - Prob. 13.2.12PACh. 13 - Prob. 13.2.13PACh. 13 - Prob. 13.2.14PACh. 13 - Prob. 13.2.15PACh. 13 - Prob. 13.3.1RQCh. 13 - Prob. 13.3.2RQCh. 13 - Prob. 13.3.3RQCh. 13 - Prob. 13.3.4PACh. 13 - Prob. 13.3.5PACh. 13 - Prob. 13.3.6PACh. 13 - Prob. 13.3.7PACh. 13 - Prob. 13.3.8PACh. 13 - Prob. 13.3.9PACh. 13 - Prob. 13.3.10PACh. 13 - Prob. 13.4.1RQCh. 13 - Prob. 13.4.2RQCh. 13 - Prob. 13.4.3RQCh. 13 - Prob. 13.4.4PACh. 13 - Prob. 13.4.5PACh. 13 - Prob. 13.4.6PACh. 13 - Prob. 13.4.7PACh. 13 - Prob. 13.4.8PACh. 13 - Prob. 13.4.9PACh. 13 - Prob. 13.4.10PACh. 13 - Prob. 13.2RDECh. 13 - Prob. 13.1CTECh. 13 - Prob. 13.2CTE
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