MACROECONOMICS

Real Output Demanded Price level Real Output Supplied (RM Billions) (Index Number) (RM Billions) 506 108 514 508 104 512 510 100 510 512 96 507 514 92 502 Suppose that aggregate demand increases such that the amount of real output demanded rises by RM 7 billion at each price level. a) By how much will the price level increase? b) Will this inflation be demand-pull inflation or will it be cost-push inflation? Explain. c) If potential real GDP (that is, full-employment GDP) is RM 510 billion, what will be the size of the positive GDP gap after the change in aggregate demand? d) Given than MPC is 0.75. How much government need to withdraw or stimulate based on macroeconomic situation identified in (b) and (c)