pols Homework (Ch 15) 4. Using fiscal policy to fight inflation Consider the hypothetical economy depicted on the graph. Initially, the economy operates below full-employment output at a price level of 105 and real GDP of $480 billion. Then aggregate demand (AD) increases from AD₁ to AD₂, moving the economy up along the intermediate and classical ranges of the aggregate supply (AS) curve. Real GDP increases to the full-employment output level of $540 billion, and the price level increases to 120. PRICE LEVEL (CPI) 130 125 120 115 110 100 95 90 85 80 400 420 440 AS AD₂ 460 REAL GDP (Billions of dollars) 480 500 520 540 560 580 AD₁ 600 MacBook Pro (?) X
pols Homework (Ch 15) 4. Using fiscal policy to fight inflation Consider the hypothetical economy depicted on the graph. Initially, the economy operates below full-employment output at a price level of 105 and real GDP of $480 billion. Then aggregate demand (AD) increases from AD₁ to AD₂, moving the economy up along the intermediate and classical ranges of the aggregate supply (AS) curve. Real GDP increases to the full-employment output level of $540 billion, and the price level increases to 120. PRICE LEVEL (CPI) 130 125 120 115 110 100 95 90 85 80 400 420 440 AS AD₂ 460 REAL GDP (Billions of dollars) 480 500 520 540 560 580 AD₁ 600 MacBook Pro (?) X
Brief Principles of Macroeconomics (MindTap Course List)
8th Edition
ISBN:9781337091985
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter18: Six Debates Over Macroeconomic Policy
Section: Chapter Questions
Problem 2CQQ
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