Use the following aggregate supply schedule to draw the short-run supply curve on the graph below.
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AS
Q
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100
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200
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300
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400
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500
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600
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700
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800
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900
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900
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Price
|
20
|
20
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25
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30
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40
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50
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60
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80
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100
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110
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1. Beginning from the original equilibrium, how much additional government spending would be required to move the economy to the full-employment level of output?
2. How much of a tax cut would be required to achieve the same goal?
3. Suppose the government required a balanced budget approach to government spending, that is, any spending increase must be offset by an equal size tax increase. Could the government stimulate the economy under these circumstances and if so, how?