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Assume that a hypothetical economy with an MPC of 0.75 is experiencing severe recession.
Instructions: In part a, round your answers to 2 decimal places. Enter positive numbers. In part b, enter your answers as whole numbers.
a. By how much would government spending have to rise to shift the aggregate demand curve rightward by $25 billion? $ 1.56 billion.
How large a tax cut would be needed to achieve the same increase in aggregate demand? $ 3.13 billion.
b. Determine one possible combination of government spending increases and tax increases that would accomplish the same goal without changing the amount of outstanding debt.
Increase spending by $ billion.
Increase taxes by $ billion.
Explain how the economy adjusts back to long-run equilibrium. When the economy has adjusted back to long-run equilibrium, how have the values of each on the following changed relative to what they were before the increase in exports:
Illustrate what is the nature of this trouble. How did this trouble come about? In what ways will this trouble impact the US economy.
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As compared to high Japanese inflation may result in an increase in the supply of yen for sale
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