Questions are listed below.

Assume that, without taxes, the consumption schedule for an economy is as shown in the rst two columns of the table below. Now suppose a proportional tax with a 10 percent tax rate is imposed instead of the regressive tax. Instructions: In part a, enter your answers as a whole number. In part b, round your answers to 1 decimal place. a. Calculate the new consumption schedule. Assume that a hypothetical economy with an MPC of 0.8 is experiencing a severe recession. Instructions: In part a, round your answers to 1 decimal place. Enter your answers as a positive number. In part b, enter your answers as a whole number. a. By how much would government spending have to rise to shift the aggregate demand curve rightward by $40 billion? 85 billion How large a tax cut would be needed to achieve the same increase in aggregate demand? Tax cut 2 15 billion b. Determine one possible combination ofgovernment spending increases and tax increases that would accomplish the same goal without changing the amount of outstanding debt. Increase government spencing by 85 billion Increase taxes by $ billion Refer to the table below. Suppose that aggregate demand increases such that the amount of real output demanded rises by $19 billion at each price level. Instructions: Enter your answers as a whole number. a. By what percentage will the price level increase? percent Will this ination be demandpull inflation, or will it be costpush ination? Costp ush ination V b. If potential real GDP [that is, fullemployment GDP} is $510 billion, what will be the size ofthe positive GDP gap after the change in aggregate demand? $5 billion c. If government wants to use scal policy to counter the resulting inflation without changing tax rates, would it increase government spending or decrease it