Question

so The hypothetical information in the following table shows what the situation will be in 2017 if Congress and the President do not use fiscal policy: Year 2016 2017 Potential GDP 17.8 trillion $18.2 trillion Price Level 113-7 115.9 Real GDP $17.8 trillion $17.8 trillion so a. If Congress and the president want to keep real GDP at its potential level in 2017, should they use an expansionary policy or a contractionary policy? In your so answer, be sure to explain whether Congress and the president should increase or decrease government purchases and taxes. so b. If Congress and the president are successful in keeping real GDP at its potential level in 2017, state whether each of the following will be higher, lower, or the same as it would have been if they had taken no action so i. Real GDP so ii. Potential GDP so ii. The inflation rate s iv. The unemployment rate o c. Draw an aggregate demand and aggregate supply graph to illustrate your answer. Be sure that your graph contains LRAS curves for 2016 and 2017; SRAS curves for 2016 and 2017, AD curves for 2016 and 2017, with and without fiscal policy action, and equilibrium real GDP and the price level in 2017, with and without fiscal policy.

answer only part c.

Answer 1