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Question: Holding other factors constant, by how much will government purchases need to be increased to bri...
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Show transcribed image text Holding other factors constant, by how much will government purchases need to be increased to bring the economy to equilibrium at potential GDP? Holding other factors constant, by how much will taxes need to be cut to bring the economy to equilibrium at potential GDP? What is an example of a combination of increase in government purchases and tax cuts that would have the desired effect of bringing the economy to equilibrium at potential GDP? An article stated that, "The Australian dollar tumbled lower after lower than expected inflation data reduced investors' expectations that the central bank would raise interest rates." Why would the inflation rate being lower than expected make it less likely that the Australian central bank would raise interest rates? Why would the fact that it was less likely that the Australian central bank was going to raise interest rates cause the value of the Australian dollar to fall?

Holding other factors constant, by how much will government purchases need to be increased to bring the economy to equilibrium at potential GDP? Holding other factors constant, by how much will taxes need to be cut to bring the economy to equilibrium at potential GDP? What is an example of a combination of increase in government purchases and tax cuts that would have the desired effect of bringing the economy to equilibrium at potential GDP? An article stated that, "The Australian dollar tumbled lower after lower than expected inflation data reduced investors' expectations that the central bank would raise interest rates." Why would the inflation rate being lower than expected make it less likely that the Australian central bank would raise interest rates? Why would the fact that it was less likely that the Australian central bank was going to raise interest rates cause the value of the Australian dollar to fall?