Based on research conducted by the department of economic analysis, the government and policy advisors of an economy believe that the full employment GDP is $7500 billion, and Pe, the overall expected price level is 118. In addition, the researcher estimate that the short run aggregate supply equation is Y=Ypot+80(P-Pe) where Ypot is the potential level of output. In 2016, the population was 400 million, and the structure of the economy was described by the following equations for household consumption behavior and tax received: C=100+0.8DI, and T=0.25Y where all monetary values are in billions of dollars. Government spending was fixed at $1700 billion, the firm's investment behavior was fixed at $800 billion. Trading is allowed in this economy and in 2016, trading occurred such that the trade account was balanced. That is, net exports (X-IM) was equal to zero.

Now consider in the following year(2017), the government decided to implement a policy aimed at moving the economy to full employment. In its decision to move the economy to the full employment, they used government spending as the policy tool. The structure and fixed spending behaviors remain the same as they were in 2016, expect for government spending. In addition, change to the population's birth, mortality, and net migration levels were such that the population remained at 400 million. The policy was implemented, and it was successful in achieving its primary purpose.

Describe the government's policy and the outcome from the policy (complete the sentences below):

In 2017, with a desire to move the economy to full employment, the government successfully implemented ______ policy aimed at ______ output. To achieve this goal, they ________ government spending in 2017. As a result, compared to the levels in 2016, real GDP was _______, real GDP per capita was _______, and the change in the price level resulted in the economy experiencing ______ over the year. In addition, the government's budget was _______. Specifically, the government ______ budget ________.

Choices are:

a contractionary fiscal

an expansionary fiscal

balanced

decreased

decreasing

deficit

deflation

did not change

had a larger

had a smaller

had the same

higher

increased

increasing

inflation

lower

not balanced

now had a

surplus