Suppose kittyville's full-employment gdp = $600 billion, and the current equilibrium gdp = $400 billion. the mpc in this economy = 0.90. identify the type of expenditure gap in kittyville's economy: to correct this gap, kittyville hires an economist, kittyzen keynes, who suggests: government spending or taxes. decreasing recessionary increasing inflationary suppose kittyville decides to change government spending under keynes' advice. by how much must government spending change to correct for the expenditure gap (rounded to nearest billion dollars)? suppose kittyville instead decides to change taxes under keynes advice. by how much must taxes change to correct for the expenditure gap (rounded to nearest billion dollars)?

answer: in the short-run firms will respond by raising the price of turkey.

explanation: initially the long-run equilibrium is at a price of $5 per pound of turkey and a quantity of 50 million pounds per year. now, when webmd claims that a protein found in turkey will increase your expected lifespan by 4 years. the consumers demand for turkey will increase at every price shifting the demand curve to the right from d1 to d2. while, there will be no change in the supply curve in the short-run as it is not possible for producers to adjust supply so quickly. as a result the new equilibrium will occur at a higher price and a higher quantity of turkey.

thus, in the short run firms will respond by increasing the price of turkey, selling more quantity at a higher price and earning economic profits.