Use both the Keynesian Cross and AS/AD graphs to answer the following questions
ID: 1112454 • Letter: U
Question
Use both the Keynesian Cross and AS/AD graphs to answer the following questions Make sure to draw both graphs and tell me which component 2. a. Show how PI and GDP will change if personal income taxes fall b. Show how Pl and GDP will change if incomes fall in Asia Using your answer to 2a, tell me how the economy gets from the old equilibrium to the new short-run equilibrium. You must discuss the change from a manufacturing perspective and from a service-industry perspective. 3. 4 Where do you get workers when unemployment is too low? Why is this costly? Refer to the different types of unemployment when answering this question.(Your answer should be 2-4 sentences long.) 5. Choose two (2) of the remaining questions to answer What causes the AS curve to change? What can the government do to increase AS? Thank about supply factors, not demand. Explain now transfer payments work to correct stabilization problems. (You may choose to focus on either recession or inflation.) What are some of the problems associated with increasing government spending to reduce unemployment? Why does the US government collect data on inventory levels? Why do nventories matter? a. b. c. d.Explanation / Answer
2)
a) If personal income taxes fall, the purchsaing power will increase of consumers as they would have to pay less as tax. This will make them have more Personal income than before. To whichthey will demand more hence increaseing AD.
Hence with fall in tax PI and GDP both will increase.
b) On the contrary side of income falls, then it would make PI fall too and hence AD will fall and then GDP will also decline.
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