A recessionary gap is how much GDP needs to increase from the current GDP to achieve full employment. Let us say that we are experiencing a recessionary gap of $36 million. Also assume that the MPC equals .80. The government decides to decrease taxes in order to close the recessionary gap. What will be the tax decrease?
A recessionary gap is how much GDP needs to increase from the current GDP to achieve full employment. Let us say that we are experiencing a recessionary gap of $36 million. Also assume that the MPC equals .80. The government decides to decrease taxes in order to close the recessionary gap. What will be the tax decrease?
Chapter15: Fiscal Policy
Section: Chapter Questions
Problem 6SQP
Related questions
Question
A recessionary gap is how much
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps with 1 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you