Refer to the table given below. Suppose that aggregate demand increases such that the amount of real output demanded rises by $15 billion at each price level.
Real Output Demanded (Original)
Price
Level
Real Output
Supplied
$500
112
$515
505
106
512
510
100
510
515
94
507
520
88
500
a.) By what percentage will the price level increase? _______ percent
b.) Will this inflation be demand-pull inflation or will it be cost-push inflation? (Click to select) Cost-push inflation or Demand-pull inflation
c.) If potential real GDP (that is, full-employment GDP) is $510 billion, what will be the size of the positive GDP gap after the change in aggregate demand? $ _______ billion
d.) If the government wants to use fiscal policy to counter the resulting inflation without changing tax rates, would it increase government spending or decrease it? (Click to select) (Increase or Decrease)
Refer to the table given below. Suppose that aggregate demand increases such that the amount of real output demanded rises by $15 billion at each price level.
|
Real Output Demanded (Original) |
Price |
Real Output |
|
$500 |
112 |
$515 |
|
505 |
106 |
512 |
|
510 |
100 |
510 |
|
515 |
94 |
507 |
|
520 |
88 |
500 |
a.) By what percentage will the price level increase? _______ percent
b.) Will this inflation be demand-pull inflation or will it be cost-push inflation? (Click to select) Cost-push inflation or Demand-pull inflation
c.) If potential real GDP (that is, full-employment GDP) is $510 billion, what will be the size of the positive GDP gap after the change in aggregate demand? $ _______ billion
d.) If the government wants to use fiscal policy to counter the resulting inflation without changing tax rates, would it increase government spending or decrease it? (Click to select) (Increase or Decrease)
Related textbook solutions
Related questions
Refer to the data below.
|
a. What is the equilibrium level of output?
What is the equilibrium price level?
b. Suppose that aggregate demand increases such that the amount of real output demanded rises by $7 billion at each price level. Insert the new values for real output demanded in the table below.
|
What is the new equilibrium level of output?
What is the new equilibrium price level?
By what percentage will the price level increase?
Will this inflation be demand-pull inflation or will it be cost-push inflation?
c. If potential real GDP (that is, full-employment GDP) is $510 billion, what will be the size of the positive GDP gap after the change in aggregate demand?
d. If the government wants to use fiscal policy to counter the resulting inflation without changing tax rates, would it increase government spending or decrease it?
