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Real GDP (billions of dollars} Instructions: Enter your answer as a whole number. If you are entering a negative number include a minus sign. a.
Real GDP (billions of dollars} Instructions: Enter your answer as a whole number. If you are entering a negative number include a minus sign. a. How much does aggregate demand need to change to restore the economy to its longrun equilibrium? $ 160 billion b. lfthe MPC is 0.6. how much do taxes need to change to shift aggregate demand by the amount you found in part a? $ 44 billion Suppose instead that the MPC is 0.8. c. How much does aggregate demand and taxes need to change to restore the economy to its longrun equilibrium? Aggregate demand needs to change by 5- billion and taxes need to Change by $ billion. The graph below depicts an economy where a decline in aggregate demand has caused a recession. Assume the government decides to conduct fiscal policy by changing taxes to reduce the burden ofthis recession. Fiscal Policy Price Level 0 El] 160 240 320 400 430 560 640 1'20 800 Real GDP (billions of dollars)
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