QUESTION The economy is initially at long-run LRAS equilibrium. Aggregate demand decreases and shifts from AD2 to AD, and 110 in the short-run output is below full- AS employment level of output. a) What is the change in aggregate Price Level 100+ demand required for the economy to return to full employment level of real GDP? 90 . AD2 b) If mpc=0.8, what is the change in AADi AD1 government purchases required? 100 150 200 250 c) If mpc=0.8, what is the change in Real GDP (Billion $'s) taxation required?Assume demand-pull inflation has occurred. Real GDP demanded is $250 billion more than full employment level of real GDP. MPC is 0.75. Should taxes be increased or decreased and by how much for the economy to return to full employment real GDP?QUESTION Assume demand-pull inflation has occurred. Real GDP demanded is $250 billion more than full employment level of real GDP. MPC is 0.75. Should government purchases be increased or decreased and by how much for the economy to return to full employment real GDP?QUESTION Use the figure to answer the question. The economy is initially at long run equilibrium. Aggregate demand decreases and shifts from AD1 to ADZ. Due to this the E economy is experiencing a recession.To resolve the problem 3 of a recession, the government can implement g 5... a) contractionary fiscal policy by increasing government '11 spending. 53 2 b) expansionary fiscal policy by decreasing government Pl spending. c) expansionary fiscal policy by decreasing taxes. d) contractionary fiscal policy by increasing taxes. QUESTION State whether the following statement is true or false. Due to a recession, the government changes the requirements to make it easier to enroll in government transfer payment programs. This is an example of automatic stabilizers. a) False. b) True