Suppose the economy is in the state described by the following table.
$$\begin{array} { | c | c | c | c | }
\hline \text { Year } & \text { Potential GDP } & \text { Real GDP } & \text { Price Level } \
\hline 1 & \$ 1100 \text { billion } & \$ 1100 \text { billion } & 100 \
\hline 2 & \$ 1150 \text { billion } & \$ 1170 \text { billion } & 109 \
\hline
\end{array}$$ What problem will occur in the economy if no policy is pursued? What fiscal policy tools could be used to combat the problem? Draw a dynamic aggregate demand and supply graph to illustrate the appropriate fiscal policy to use in this situation. _____________________________________________________________________________________________
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Question

Suppose the economy is in the state described by the following table.
 $$\begin{array} { | c | c | c | c | } 
\hline \text { Year } & \text { Potential GDP } & \text { Real GDP } & \text { Price Level } \
\hline 1 & \$ 1100 \text { billion } & \$ 1100 \text { billion } & 100 \
\hline 2 & \$ 1150 \text { billion } & \$ 1170 \text { billion } & 109 \
\hline
\end{array}$$ What problem will occur in the economy if no policy is pursued? What fiscal policy tools could be used to combat the problem? Draw a dynamic aggregate demand and supply graph to illustrate the appropriate fiscal policy to use in this situation.  _____________________________________________________________________________________________
_____________________________________________________________________________________________

Quizplus · Accepted Answer

The Answer of Suppose the economy is in the state described by the following table.
 $$\begin{array} { | c | c | c | c | } 
\hline \text { Year } & \text { Potential GDP } & \text { Real GDP } & \text { Price Level } \
\hline 1 & \$ 1100 \text { billion } & \$ 1100 \text { billion } & 100 \
\hline 2 & \$ 1150 \text { billion } & \$ 1170 \text { billion } & 109 \
\hline
\end{array}$$ What problem will occur in the economy if no policy is pursued? What fiscal policy tools could be used to combat the problem? Draw a dynamic aggregate demand and supply graph to illustrate the appropriate fiscal policy to use in this situation.  _____________________________________________________________________________________________
_____________________________________________________________________________________________

Suppose the Economy Is in the State Described by the Following