The required government spending to decrease the real GDP by $400 billion.

Question

Assume that full-employment real GDP is Y = $1,200 billion, the current equilibrium real GDP is Y = $1,600 billion, and the MPC = 0.8. In order to bring the economy to a full-employment real GDP: Group of answer choices a recessionary gap must be bridged by increasing aggregate expenditures by $80 billion. an inflationary gap must be bridged by cutting aggregate expenditures by $80 billion. nothing is needed to bring the economy into full employment equilibrium. a recessionary gap must be bridged by increasing aggregate expenditures by $400 billion. an inflationary gap must be bridged by cutting aggregate expenditures by $400 billion.

Answer 1

Question

Chapter 19, Problem 15SQ

To determine

The required government spending to decrease the real GDP by $400 billion.

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Assume that full-employment real GDP is Y = $1,200 billion, the current equilibrium real GDP is Y = $1,600 billion, and the MPC = 0.8. In order to bring the economy to a full-employment real GDP: Group of answer choices a recessionary gap must be bridged by increasing aggregate expenditures by $80 billion. an inflationary gap must be bridged by cutting aggregate expenditures by $80 billion. nothing is needed to bring the economy into full employment equilibrium. a recessionary gap must be bridged by increasing aggregate expenditures by $400 billion. an inflationary gap must be bridged by cutting aggregate expenditures by $400 billion.

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