Question

(a) how much fiscal restraint occurred between 1931 and 1933? $ billion (b) by how much did this policy reduce aggregate demand if the mpc was 0.88? $ billion

Answer 1

Answer:

a. Structures deficit decreased from $4.5 billion to a surplus of $2 billion, therefore the amount of fiscal restraint that occured between 1931 and 1933 is $6.5 billion.

b. Using the formula

Change in aggregate demand = 1/1- mpc x change in fiscal restraint

= 1/1-0.8×(-6.5)

= 1/0.2x(-6.5)

= 5x-6.5

= -$32.5 billion

Answer 2

Answer:

hi your question is incomplete attached to the answer is the complete question

answer :  A ) $6 billion

                B)  -$50 billion

Explanation:

A)  The fiscal restraint that occurred between 1931 and 1933 from the given graph below is =  +2 - (-4)

              = + 2 + 4 = $6 billion

B) By how much did this policy reduce aggregate demand if the MPC was 0.88

using this formula =

$\frac{1}{1-mpc} * fiscal restraint$

= $\frac{1}{1 - 0.88 } * 6$ = $\frac{1}{0.12} * 6$ = $49.99 ≈ $50 billion