Economy is operating above above full employment

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Reference no: EM131162326

Please round all calculations to two decimal places.(please be very detail)

a. Draw the appropriate graph assuming that the economy is operating above above full employment. Assuming the aggregate demand excess is $1899 and MPC is .84, calculate the amount of desired fiscal restraint.

b. Given the situation in a, if government spending decreases by $304B, calculate the impact to aggregate demand. Illustrate this scenario on a separate graph from above. Is there a GDP gap? If so, what type?

c. Given the situation in a, calculate what would happen if the government increases taxes by $304B. Illustrate the affects on a separate graph. Is there a GDP gap? If so, what type?

d. Which type of government intervention (from scenarios B & C ABOVE) gets us closer to full employment output?

Reference no: EM131162326

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