uestion 4 - Step 3 - Fiscal Policy x G b. If the MPC is 0.667, how much > ezto.mheducation.com/ext/map/index.html?_con=con&external_browser=0&launchUrl=https%253A%252F%252Fnewconnect.mheducation.c Step 3 - Fiscal Policy Homework i Saved The graph below depicts an economy where a decline in aggregate demand has caused a recession. Assume the government 4 decides to conduct fiscal policy by changing taxes to reduce the burden of this recession. Fiscal Policy 10 140 points 130 AS 120 Book 110 100 Price Level 90 - References 80 AD AD 80 160 240 320 400 480 560 640 720 800 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 long-run equilibrium? $ billion b. If the MPC is 0.667, how much do taxes need to change to shift aggregate demand by the amount you found in part a? $ billion Suppose instead that the MPC is 0.5. c. How much does aggregate demand and taxes need to change to restore the economy to its long-run equilibrium? Aggregate demand needs to change by $ billion and taxes need to change by $ billion. Mc Grav