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krisha900Lv1
8 Apr 2023
FRQ # 3
Assume that the United States economy is currently operating below the full-employment level of real gross domestic product with a balanced budget
- Using your knowledge of the AS/AD graph where would the current output and price level be?
- The United States government increases spending on goods and services by $100 billion, which is financed by borrowing. How will the increase in government spending affect each of the following?
- Cyclical unemployment
- The Natural Rate Of Unemployment
- If the marginal propensity to consume is equal to 0.75, calculate the maximum possible change in real gross domestic product that could result from the $100 billion increase in government spending.
- Using a correctly labeled graph of the loanable funds market, what would be the effect of the $100 billion increase in government spending on the real interest rate.
- Based on the real interest rate change in part (d), what is the effect on the long-run economic growth rate? Explain.
- Now assume that instead of financing the $100 billion increase in government spending by borrowing, the United States government increases taxes by $100 billion. With this equal increase in government spending and taxes, will the real gross domestic product increase, decrease, or remain the same? Explain.
FRQ # 3
Assume that the United States economy is currently operating below the full-employment level of real gross domestic product with a balanced budget
- Using your knowledge of the AS/AD graph where would the current output and price level be?
- The United States government increases spending on goods and services by $100 billion, which is financed by borrowing. How will the increase in government spending affect each of the following?
- Cyclical unemployment
- The Natural Rate Of Unemployment
- If the marginal propensity to consume is equal to 0.75, calculate the maximum possible change in real gross domestic product that could result from the $100 billion increase in government spending.
- Using a correctly labeled graph of the loanable funds market, what would be the effect of the $100 billion increase in government spending on the real interest rate.
- Based on the real interest rate change in part (d), what is the effect on the long-run economic growth rate? Explain.
- Now assume that instead of financing the $100 billion increase in government spending by borrowing, the United States government increases taxes by $100 billion. With this equal increase in government spending and taxes, will the real gross domestic product increase, decrease, or remain the same? Explain.
11 Apr 2023
parisamohsenLv1
8 Apr 2023
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