Present graphical interpretation of the problem

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Reference no: EM131094501

Suppose that AS/AD model is given by

Yp=$500 Billion

P= 200-0.1Y

P=20+0.4Y

Where Yp is potential GDP, Y is real GDP in billion of dollars and P is GDP deflator. By how much overall should the government expenditures change to achieve potential GDP level if MPC=0.8? Calculate the size of inflation/deflation associated with this fiscal policy action. Present graphical interpretation of the problem.

Reference no: EM131094501

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