Economics 1022A/B Lecture Notes - Loanable Funds, Phillips Curve, Stagflation
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Refer to the table given below. Suppose that aggregate demand increases such that the amount of real output demanded rises by $15 billion at each price level.
Real Output Demanded (Original) |
Price |
Real Output |
$500 |
112 |
$515 |
505 |
106 |
512 |
510 |
100 |
510 |
515 |
94 |
507 |
520 |
88 |
500 |
a.) By what percentage will the price level increase? _______ percent
b.) Will this inflation be demand-pull inflation or will it be cost-push inflation? (Click to select) Cost-push inflation or Demand-pull inflation
c.) If potential real GDP (that is, full-employment GDP) is $510 billion, what will be the size of the positive GDP gap after the change in aggregate demand? $ _______ billion
d.) If the government wants to use fiscal policy to counter the resulting inflation without changing tax rates, would it increase government spending or decrease it? (Click to select) (Increase or Decrease)