CHAPTER 16 Fiscal Policy, Deficits, and Debt PROBLEMS 1. Columns 1 and 2 in the
ID: 1108176 • Letter: C
Question
CHAPTER 16 Fiscal Policy, Deficits, and Debt PROBLEMS 1. Columns 1 and 2 in the following table are an aggregate supply schedule. Columns 1 are an aggregate demand schedule. and 3 Price level Real GDP AD AD 220 200 190 180 160 $2390 $2100 $2200 2390 2200 2340 2350 2250 2350 2300 2400 2400 2500 2300 2200 The equilibrium real GDP is $ and the price level is a. b. Suppose that an expansionary fiscal policy increases aggregate demand from that shown in columns 1 and 3 to that shown in columns 1 and 4. The price level will increase to and this nse in the price level will result in real GDP increasing to 2. wComplete the table below by satng whether the drecion ot icetolary was contractionary (C), expansionary (E), or neither (N), given the hypothetical budget data for an economy laia Actual budget deficit (-) or Cyclically adjusted budget deficit or surplus(t)- Direction of fiscal policy Year surplus 1 $170 billion 2120 billion -$130 billion - 90 billion 3 40 billion20 billion 4 60 billion50 billion - 100 billion 5 120 billion b. The best gauge of the direction of fiscal policy is the (actual, cyclically adjusted) budget deficit or surplus because it removes the (cyclical, actual) -component from the discussion of the budget situation. c. (1) In what years were there cyclical deficits, and what was the amount of the cyclical deficit in each of those years? (2) In what year was the actual budget surplus greater than the cyclically adjusted budget surplus, and by what amount greater?Explanation / Answer
1) a ) The equilbruim real GDP is $2300 and the price level is $180
because, the equilbruim real GDP is defined by the intersection of aggregate demand and aggregate supply .thus, at real GDP $2300 . the aggregate demand is also $2300. therefore this is the equilbruim real GDP.
b) suppose that an expansionary fiscal policy .......................................... .
the price level increase to $190 and this rise in the price level will result in real GDP increasing to $2350.
because when the aggregate demand increases, the price level aslo rises, thus increase real GDP also. and real GDP $2350, aggregate supply is equal to aggregate demand.
2) please upload it again. (chegg policy)