Answer exercises 11-14 on the basis of thefollowing information. Assume that equilibriumreal GDP is $800 billion, potential real GDP is$950 billion, the MPC is .80, and the MPI is .40. 14. If government spending and taxes both change by thesame amount, how much must they change to eliminatethe recessionary gap?

A recession can be described as a sustained period of weak or negative decelipment in real GDP…

Answered: following real GDP is $800 billion,…

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following real GDP is $800 billion, potential real GI $950 billion, the MPC is .80, and the MPL

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter11: Fiscal Policy

Section: Chapter Questions

Problem 11E

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Question

Answer exercises 11-14 on the basis of the
following information. Assume that equilibrium
real GDP is $800 billion, potential real GDP is
$950 billion, the MPC is .80, and the MPI is .40.

14. If government spending and taxes both change by the
same amount, how much must they change to eliminate
the recessionary gap?

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