Page 250 - Krugmans Economics for AP Text Book_Neat
P. 250
Tackle the Test: Free-Response Questions
Aggregate LRAS SRAS
price Answer (8 points)
level
1 point: Inflationary
E 1 point: Contractionary
P E
1 point: Taxes
1 point: Government transfers
1 point: Government purchases of goods and services
AD
Y P Y E Real GDP 1 point: Increase taxes
1 point: Decrease Government transfers
1. Refer to the graph above.
a. What type of gap exists in this economy? 1 point: Decrease government purchases of goods and services
b. What type of fiscal policy is appropriate in this situation?
c. List the three variables the government can change to 2. a. Draw a correctly labeled graph showing an economy
implement fiscal policy. experiencing a recessionary gap.
d. How would the government change each of the three b. What type of fiscal policy is appropriate in this situation?
variables to implement the policy you listed in part b. c. Give an example of what the government could do to
implement the type of policy you listed in part b.
208 section 4 National Income and Price Determination
