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Home / Questions / Price Level O T Problem Solving Taxes Exercise 1 The graph below depicts decides

# Price Level O T Problem Solving Taxes Exercise 1 The graph below depicts decides

Price Level O T Problem Solving Taxes Exercise 1 The graph below depicts decides to conduct fiscal policy by changing taxes to reduce the burden of this recession. an economy where a decline in aggregate demand has caused a recession. Assume the government Fiscal Policy 150 LRAS AS 140 130 120 110 100 90 80 70 60 AD 50 40 F AD, 30 80 160 240 320 400 480 560 640 720 800 Real GDP (billions of dollars) Instructions: Enter your answers as a whole number. If you are front of those numbers. entering any negative numbers be sure to include a negative sign () in 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 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? billion and taxes need to change by \$ billion. Aggregate demand needs to change by \$

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