This paper circulates around the core theme of Suppose a country increases government purchases by $100 billion. Suppose the multiplier is 1.5 and the economy’s real GDP is $5,000 billion. a. In which direction will the aggregate demand curve shift and by how much? b. Why is the change in real GDP together with its essential aspects. It has been reviewed and purchased by the majority of students thus, this paper is rated 4.8 out of 5 points by the students. In addition to this, the price of this paper commences from £ 99. To get this paper written from the scratch, order this assignment now. 100% confidential, 100% plagiarism-free.
Macro-economic choices, particularly in the areas of fiscal policy, are not just about economics but about political philosophies, values and goals. This Case asks you to think about some of these dimensions.
1. Do all government purchases have the same effect on aggregate demand? Defend your answer with economic reasoning.
2. Suppose a country increases government purchases by $100 billion. Suppose the multiplier is 1.5 and the economy’s real GDP is $5,000 billion.
a. In which direction will the aggregate demand curve shift and by how much?
b. Why is the change in real GDP is likely to be smaller than the shift in the aggregate demand curve?
