ces Refer to the table below. Real Output Demanded, Original, Billions $506 508 510 512 514 Price Level 110 105 percent 100 95 90 Decrease Real Output Supplied, Billions Suppose that aggregate demand increases such that the amount of real output demanded rises by $7 billion at each price level. Instructions: Enter your answers as a whole number. a. By what percentage will the price level increase? billion $ 513 512 510 507 502 Will this inflation be demand-pull inflation, or will it be cost-push inflation? Demand-pull inflation ✓ b. 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? $ c. If government wants to use fiscal policy to counter the resulting inflation without changing tax rates, would it increase government spending or decrease it?

ces Refer to the table below. Real Output Demanded, Original, Billions $506 508 510 512 514 Price Level 110 105 percent 100 95 90 Decrease Real Output Supplied, Billions Suppose that aggregate demand increases such that the amount of real output demanded rises by $7 billion at each price level. Instructions: Enter your answers as a whole number. a. By what percentage will the price level increase? billion $ 513 512 510 507 502 Will this inflation be demand-pull inflation, or will it be cost-push inflation? Demand-pull inflation ✓ b. 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? $ c. If government wants to use fiscal policy to counter the resulting inflation without changing tax rates, would it increase government spending or decrease it?

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter6: Measuring The Cost Of Living

Section: Chapter Questions

Problem 9PA

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