Table 18-5 -Refer to Table 18-5

question 249

Essay

Table 18-5
$\begin{array}{|c|c|c|c|}\hline \text { Year } & \text { Potential Real GDP } & \text { Real GDP } & \text { Price Level } \\\hline 1 & \$ 10.2 \text { trillion } & \$ 10.2 \text { trillion } & 100 \\\hline 2 & 10.8 \text { trillion } & 10.6 \text { trillion } & 103 \\\hline\end{array}$
-Refer to Table 18-5.The economy is in the state described by the table above.Draw the dynamic aggregate demand and aggregate supply diagram to illustrate the state of the economy in year 1 and year 2,assuming that no policy is pursued.Then illustrate and explain the appropriate fiscal policy to use in this situation.Assume that the policy results in the economy producing potential GDP.

---

Definitions:

Paperback Edition

A version of a book that has a cover made of paper or cardboard, typically less expensive and lighter than hardcover versions.

Home Heating

The process of increasing the temperature of an indoor space for comfort, typically achieved through systems like furnaces, boilers, or heat pumps.

Monopolists

Entities or individuals that have exclusive control over the supply of a particular good or service, potentially leading to distorted markets and higher prices.

Internalize

The process of absorbing or incorporating the costs or benefits of a transaction or activity, which were previously external to a market decision-maker, into their own decision-making process.