Solve each of the following problems as a way oftesting the degree that you have understood the material covered in thismodule.One of the dangers of using expansionary fiscalpolicy is that it can cause inflation. Under what macroeconomiccircumstances is an expansionary fiscal policy likely to do this? Useannotated sketch graphs to answer this question. (3)Use annotated AD/AS graphs to predict the impact of each of the following fiscal policies on equilibrium output (GDP) and price level. (6)an increase in G with no change in T when the economy is in recessionan increase in T with no change in G when the economy is suffering inflationincreases in both G and T when the economy is in recessionA decrease in government purchases (G) of $8 billion leads to an initial decrease in withdrawals of $4.4 billion.(6)Find the values of the MPW, MPC, and M in this economy.State the direction and size of the shift in the AD curve.Draw a graph to illustrate the policy’s likelyeffects, given a starting equilibrium price level and output of 130 and$650 billion.
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