15. Suppose AD in a country is given by P = 21C! .2}"', SEAS is given by P = 1m and potential output is equal to Ir'. The marginal propensity to consume is I214. a. b. What type of output gap exists and what is the size of the gap? If the government wanted to push the economy back towards LR equilibrium by changing taxes and they changed taxes such that the new AD curve is equal to P = 25C! DDZY, by how much did they change taxes? Did they reach LR equilibrium? If they had perfect information about the economy, by how much would they have changed taxes initially? What is the AD equation given the tax change in part {c}? (Hint: you should know slope and the price level and output of a specic point]