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Macroeconomics 1st Edition by Dean Karlan,Jonathan Morduch
Edition 1ISBN: 978-0077332648Macroeconomics 1st Edition by Dean Karlan,Jonathan Morduch
Edition 1ISBN: 978-0077332648 Exercise 29
The diagram in Figure 12P-1 shows aggregate demand for New Caprica last year (AD 1 ) and the aggregate demand for this year (AD 2 ). If you were to advise the president of New Caprica on economic policy, how would you answer the following?
a. How large is current output? How large is potential output? What is the difference, if any, between the two? b. Is New Caprica in a recession or a boom?
c. Given your findings, should the president enact expansionary or contractionary fiscal policy, or no policy at all?
d. Which direction would the aggregate demand curve shift if the president used contractionary fiscal policy?
a. How large is current output? How large is potential output? What is the difference, if any, between the two? b. Is New Caprica in a recession or a boom?
c. Given your findings, should the president enact expansionary or contractionary fiscal policy, or no policy at all?
d. Which direction would the aggregate demand curve shift if the president used contractionary fiscal policy?
Explanation
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a.the equilibrium in the economy in shor...
Macroeconomics 1st Edition by Dean Karlan,Jonathan Morduch
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