26 Jul BRIEFLY EXPLAIN WHY THIS IS THE CASE.
A. Us Show more PROBLEM 1. You are given the following table (all demand and supply numbers are in billions): A. Using the information provided in the table sketch both aggregate demand curves and the aggregate supply curve. Make sure you label your curves and axes. B. What is the full-employment output (quantity) and price index? C. Assume the level of aggregate demand in the economy is AD1. If this is the case the inflationary/recessionary (choose one) GDP gap equals $_________ billion. The aggregate demand (AD) excess/shortfall (choose one) equals $_______ billion. D. Given the following consumption function: C = 5 + 0.75Yd the marginal propensity to consume equals ________ and the simple Keynesian multiplier equals ________ . E) In order to address the aggregate demand (AD) excess/shortfall you identified in part c and given the multiplier you calculated in part d the government would need to directly spend $ __________ . F) If the government decided to reduce taxes instead of use its own spending powers to address the situation you identified in part c would the amount of the tax cut have to be more or less than the amount you specified in part E? Briefly explain why this is the case. g) BONUS (2 points): Exactly how much more/less would the tax cut have to be than the government expenditure you identified in part e to yield the same amount of fiscal stimulus? Show less
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