Consider the following information on aggregate demand and supply of real output. Suppose that aggregate demand increases such that the amount of real output demanded rises by $17 billion at each price level.

Real Output Demanded (Original)- 498, 504, 510, 516, 522

Price Level - 114, 107, 100, 93, 86

Real OutputSupplied - 515, 512, 510, 507, 500

a.By what percentage will the price level increase?

percent

b.Will this inflation be demand-pull inflation or will it be cost-push inflation?

(Click to select)

Cost-push inflation

Demand-pull inflation

c.If potential real GDP (that is, full-employmentGDP) is $510 billion, what will be the size of the positive GDP gap after the change in aggregate demand?

$billion

d.If the government wants to use fiscal policy to counter the resulting inflation without changing tax rates, would it increase government spending or decrease it?

(Click to select)

Decrease

Increase