a. How much does aggregate demand need to change to restore the economy to its long-run equilibrium? billion b. If the MPC is 0.75, how much does government purchases need to change to shift aggregate demand by the amount you found in parta? $ billion Suppose instead that the MPC is 06. c. How much does aggregate demand and government purchases need to change to restore the economy to its long-run equilibrium? Aggregate demand needs to change by $[ billion and government purchases need to change by $1 billion.
a. How much does aggregate demand need to change to restore the economy to its long-run equilibrium? billion b. If the MPC is 0.75, how much does government purchases need to change to shift aggregate demand by the amount you found in parta? $ billion Suppose instead that the MPC is 06. c. How much does aggregate demand and government purchases need to change to restore the economy to its long-run equilibrium? Aggregate demand needs to change by $[ billion and government purchases need to change by $1 billion.
Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506725
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter12: Fiscal Policy, Incentives, And Secondary Effects
Section: Chapter Questions
Problem 8CQ
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Step 1: Introduce the concept of Marginal Propensity to Consume (MPC).
VIEWStep 2: a. Determine how much does aggregate demand need to increase.
VIEWStep 3: b. Determine If the MPC in this nation is 0.75, how much does government purchases need to increase
VIEWStep 4: c. Determine to restore the economy to its long-run equilibrium, AD must be increased by how much.
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