10SQ11 - b. Which type of fiscal policy would move this...

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Econ. 1A. Quiz 10. (Take home). Due: Wed. 05/12/10. (Turn in your answer in the beginning of the class) Name: _________________________. ID: _________________________. P LAS SAS 1 P 1 E 1 AD 1 Y Y 1 Y P The graph shows the current macroeconomic situation for the economy of Econland. You have been hired as an economic adviser to help the economy move to full- employment equilibrium, i.e., potential GDP, Y p . a. Is Econland facing a recessionary gap or inflationary gap? Explain your answer. [2]
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Unformatted text preview: b. Which type of fiscal policy would move this economy to potential output? What are some examples of such policies? Also show your answer graphically. [5] c. Which type of monetary policy would close this gap? How could the Fed use three main policy tools to achieve the objective of Econland? [5]...
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