I need some help with a homework question that I just can't figure out.
here is the information I have given and I must derive a graph with it to answer the questions, but I don't know how to graph the info or what the axes should be labeled as either.
C=0.9(Y-tY)+2000 ... C= consumption expenditure, Y= real GDP, t=Tax Rate
I=2500... I=investment
G=3000... G= Government expenditure
X-M=400... X-M= Net Exports
t=20%...t=tax rate
Yp- 26000... Yp= Potential (real)GDP
a) is this economy experiencing a recessionary gap or an inflationary gap?
b) If the Federal Gov were to change the government spending in order to close this gap, by how much and in which direction does G have to change?
Both a) and b) must be graphed and I don't understand how to graph these when I don't use the MPC? Any help is appreciated!
Copyright © 2024 Q2A.ES - All rights reserved.
Answers & Comments
you should graph the aggregate supply and aggregate demand curves to answer a). The x axis is real GDP and the y axis is the GDP price deflator
Include the short run aggregate supply curve to show movement