# A. By what percentage will the price level increase? Will this inflation be demand-pull inflation or...

###### Question:

a. By what percentage will the price level increase?

Will this inflation be demand-pull inflation or will it be cost-push inflation?

b. If potential real GDP (that is, full-employment GDP) is $510 billion, what will be the size of the positive GDP gap after the change in aggregate demand? c. If government wants to use fiscal policy to counter the resulting inflation without changing tax rates, would it increase government spending or decrease it? Refer to the table below Real Output Demanded Real Output Supplied Billions$506 508 510 512 514 Price Level 112 106 100 94 Billions $513 512 510 507 502 Suppose that aggregate demand increases such that the amount of real output demanded rises by$7 billion at each price level

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