# Given the macro economic data below, draw a graph to illustrate if there is arecessionary gap in the given economy.Real GDP \$1000BConsumption (100K is Autonomous) \$600BInvestment \$100BGovernment Spending \$200BExport \$50BImport \$50BMarginal Propensity to Consume 0.50AD (Expenditure) 45 degree  AD = AS\$ 1000B AS (Real GDP)a. Calculate the size of the recessionary gap in the economy.b. What would happen to the recessionary gap if the government cut incometaxes by \$50B? c. What would happen to the recessionary gap if the Fed increased discountrates? Explain your answer.

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Given the macro economic data below, draw a graph to illustrate if there is a
recessionary gap in the given economy.
Real GDP \$1000B
Consumption (100K is Autonomous) \$600B
Investment \$100B
Government Spending \$200B
Export \$50B
Import \$50B
Marginal Propensity to Consume 0.50

\$ 1000B AS (Real GDP)

a. Calculate the size of the recessionary gap in the economy.

b. What would happen to the recessionary gap if the government cut income
taxes by \$50B?

c. What would happen to the recessionary gap if the Fed increased discount

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Step 1

a.)

Recessionary gap:

Equilibrium GDP can be calculated as follows:

Step 2

Figure -1

Figure -1 shows the recessionary gap.

Step 3

b.

Tax multiplier:

Tax multiplier can be calcu...

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