How do you calculate gdp? How do you calculate gdp? Fiscal policy is defined as

Question

How do you calculate gdp? How do you calculate gdp? Fiscal policy is defined as making discretionary changes in govemment employment or reduced inflation or | to achieve such national goals as high To address a situation in which there is gap and the economy is operating at less than long-run aggregate supply (LRAS), the govemment can spending This policy action shifts the aggregate demand curve to the right, causing the equilibrium level of real GDP per year to increase | gap, the government can its spending and cause the aggregate demand curve to shift to the left. To address a situation in which there is which reduces the equilibrium level of real GOP per year Changes in taxes c an have similar offects on the equilibium rate of real GDP and the pice level if there is an infationany lin taxes can lead to a 1 in taxes can increase equilibrium real GDP per year decrease in the equilibrium level of real GDP per year In contrast, if there is a recessionary gap sionary gap

Explanation / Answer

Change in govt. Expenditure or taxes to achieve national goals is known as fiscal policy

To address a situation of recessionary gap and the econony is operating at less than LraS, govt can increase its spending which causes AD shift right

In case of inflationary gap, govt. Can decrease its spending and AD shifts left.

In Inflationary gap, there should be increase in taxes that can lead to decrease in equilibrium Gdp.

In contrast there is recessionary gap, then decrase in tax can increase equilibrium real GDP

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