Suppose the economy is in a boom and spending is thought to be $75 billion above potential GDP. Suppose Congress decides to reduce military spending in an attempt to stabilize the economy.
(A) Show the situation using the agpregate demant curve and the $I A$ line.
(B) What happens to the inflation rate and the interest rate?
(C) Accorching to the lang-run prowth madel in Chepter 19 in your text what effect would this policy heve an econamic prowth?

Question

Suppose the economy is in a boom and spending is thought to be $75 billion above potential GDP. Suppose Congress decides to reduce military spending in an attempt to stabilize the economy.
 (A) Show the situation using the agpregate demant curve and the $I A$ line.
(B) What happens to the inflation rate and the interest rate?
(C) Accorching to the lang-run prowth madel in Chepter 19 in your text what effect would this policy heve an econamic prowth?

Quizplus · Accepted Answer

The Answer of Suppose the economy is in a boom and spending is thought to be $75 billion above potential GDP. Suppose Congress decides to reduce military spending in an attempt to stabilize the economy.
 (A) Show the situation using the agpregate demant curve and the $I A$ line.
(B) What happens to the inflation rate and the interest rate?
(C) Accorching to the lang-run prowth madel in Chepter 19 in your text what effect would this policy heve an econamic prowth?

Suppose the Economy Is in a Boom and Spending Is IAI AIA

Suppose the Economy Is in a Boom and Spending Is $I A$