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Refer to the figure below: Price Level (average price) AS PE PF E₂ E₁ AD Gap AD Excess 5.8 6.0 6.2 AD 2 1 QF Real Output (trillions of dollars per year) If the marginal propensity to consume was 0.83, how large would each of the following need to be in order to restore full-employment equilibrium? Instructions: Round your responses to one decimal place. a. A tax increase $ billion b. A government spending cut $ billion c. A cut in income transfers

Refer to the figure below: Price Level (average price) AS PE PF E₂ E₁ AD Gap AD Excess 5.8 6.0 6.2 AD 2 1 QF Real Output (trillions of dollars per year) If the marginal propensity to consume was 0.83, how large would each of the following need to be in order to restore full-employment equilibrium? Instructions: Round your responses to one decimal place. a. A tax increase $ billion b. A government spending cut $ billion c. A cut in income transfers

MACROECONOMICS
MACROECONOMICS
14th Edition
ISBN:9781337794985
Author:Baumol
Publisher:Baumol
Chapter11: Managing Aggregate Demand: Fiscal Policy
Section: Chapter Questions
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Refer to the figure below: Price Level (average price) AS PE PF E₂ E₁ AD Gap AD Excess 5.8 6.0 6.2 AD 2 1 QF Real Output (trillions of dollars per year) If the marginal propensity to consume was 0.83, how large would each of the following need to be in order to restore full-employment equilibrium? Instructions: Round your responses to one decimal place. a. A tax increase $ billion b. A government spending cut $ billion c. A cut in income transfers
Transcribed Image Text:Refer to the figure below: Price Level (average price) AS PE PF E₂ E₁ AD Gap AD Excess 5.8 6.0 6.2 AD 2 1 QF Real Output (trillions of dollars per year) If the marginal propensity to consume was 0.83, how large would each of the following need to be in order to restore full-employment equilibrium? Instructions: Round your responses to one decimal place. a. A tax increase $ billion b. A government spending cut $ billion c. A cut in income transfers
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