Question

need help filling in the blanks on the top half, goes with the graphs.

T + 125% Media Comment Shape Table Chart Text Insert Add Page Zoom Name Ch10&11a HW 2.5@ The economy on the left risks more inflation. Current Action is taken to GDP is at with prices of 103 100 reduce aggregate demand to the left which initialy 100 94 but the fall reduces GDP all the way down to brought about by the demand -in prices to 42 60 63 0 78 80 88 %. The fiscal excess, which is the and deflation of reduction causes GDP to partially rebound back to while the GDP gap is the difference between the start difference between the highest and lowest GDP is with prices of The economy on the right suffers a recession. Current GDP is at and finish is Action is taken to increase aggregate demand to the right which initially increases GDP all the way out to brought about by the demand increase causes GDP to partially fall back to but the rise in prices to and inflation of %. The fiscal shortfall, which is the difference between the highest and lowest GDP is while the GDP gap is the difference between the start and finish is T cycle#2 cycle#1°MPC(MPC) cycle#2 cycle#1 " MPC multiplier Tmult MPC/MPS 1/MPS MPS cycle # 2 MPC cycle #1 multiple cumulative .1 270 300,300 .9 1)3000 1.1 .1 .9 243 300,300(.9) 2)2700 9/.1 100 2 8 125,125 3)625 1.2 2 80 125,125(8) 8 4)500 812 240 25 75 5)1280 1/.25 320,320 6)960= 25 320,320(.75) 75 180 .75/25 4 7)375 8)225 90 150,150 6 1/.4 4 150,150(.6) 6/4 303 words 4,680 29 8 12

Answer 1

The economy on the left-

Current GDP is at 88 with prices of 100. Action...reduces GDP all the way down to 78 but the fall in prices to 94 brought by the demand reduction causes the GDP to rebound back to 80 and deflation of 6% (=(94-100)/100*100)).

The fiscal excess is 88-78= 10

GDP gap is 88-80=8.

The economy on the right-

Current GDP is at 42 with prices of 100. Action... Increases GDP all the way out to 53 but the rise in prices to 103 brought by the demand increase causes the GDP to partially fall back to 50 and inflation of 3% (=(103-100)/100*100)).

The fiscal shortfall is 53-42= 11

GDP gap is 50-42=8.