If $500,000 in new taxes is raised and spent on building a new school and $300,000 in private spending would have been spent anyway, $200,000 is added to short-run aggregate demand.
In the given question, if $500,000 in new taxes is raised and spent on building a new school and $300,000 in private spending would have been spent anyway.
Then we have to find how much is added to short-run aggregate demand.
As we know that;
The connection between planned national output (GDP) and the overall price level is known as short run aggregate supply (SRAS). When calculating SRAS, we make the short-term assumptions that production costs, costs of labor, and technological status are all constant.
New taxes raised by = $500,000
Private spending = $300,000
So added to short-run aggregate demand = Raised Taxes - Private spending
Added to short-run aggregate demand = $500,000 - $300,000
Added to short-run aggregate demand = $200,000
To learn more about short-run aggregate demand link is here
brainly.com/question/15290036
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