70 460 480 500 520 540 560 580 600 Real GDP a. If potential GDP (LAS) IS $580, and the economy is presently in equilibrium, then there is a(n) recessionary gap of $ 60 billion, b. In order to close this gap aggregate demand must Increase by $ 60 billion. c. If every $1 change in government spending leads to a $4 change in aggregate demand, government spending must increase by $ 15 billion. d. Suppose that Initially government had a balanced budget. If government Increases Its spending as In part (c) and tax revenues are 0.25 of real GDP, what will be the government's real budget surplus/deficit at full-employment equillbrium? The government budget would have a deficit of $ 45 billion.

70 460 480 500 520 540 560 580 600 Real GDP a. If potential GDP (LAS) IS $580, and the economy is presently in equilibrium, then there is a(n) recessionary gap of $ 60 billion, b. In order to close this gap aggregate demand must Increase by $ 60 billion. c. If every $1 change in government spending leads to a $4 change in aggregate demand, government spending must increase by $ 15 billion. d. Suppose that Initially government had a balanced budget. If government Increases Its spending as In part (c) and tax revenues are 0.25 of real GDP, what will be the government's real budget surplus/deficit at full-employment equillbrium? The government budget would have a deficit of $ 45 billion.

Principles of Economics (MindTap Course List)

8th Edition

ISBN:9781305585126

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter34: The Influence Of Monetary And Fiscal Policy On Aggregate Demand

Section: Chapter Questions

Problem 4CQQ

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