1. Assume the U. S. economy is currently at full employment level of real gross domestic product and has a balanced
budget
1. Draw and upload a correctly labeled graph of
aggregate demand and aggregate supply showing the
price level and real output.
2. Costa Rica is a major importer of United States
products. Assume that the Costa Rican economy goes
into a severe recession.
1. Explain the impact the Costa Rican recession on U. S.
equilibrium output and price level.
2. Show the effects on the graph in part (a) and label the
recessionary or inflationary gap. upload final image
1. Assume that Congress uses fiscal policy to curb the
effects of the Costa Rican recession on the U. S.
economy. Explain the two options that Congress has
to close the gap.
2. Assuming the government decides to focus on
changing spending to close the gap. Explain how the
change in spending will effect the following:
1. The National Debt
2. Real interest rates
3. Investment