Question

Quiz: Quiz - chp. 27 Time Remaining: 001948 Submit Qui This Question: 1 pt 16 of 20(19 complete) This Quiz: 20 pts possible [Related to Solved Problem ?4 4.0 Suppose that real GDP isor enty $13.7trilion and potential eal GOP $14 Otra nor a pio of S300 bíl . The govement pr hases ier"sa andre lax m air as olding other factors constant, by how much will government purchases need to be increased to bring the economy to equilibrium at potential GDP Govemment spending will need to be increased by sbillion (Enter your response rounded to the nearest whole number) Holding other factors constant, by how much will taxes have to be cut to bring the economy to equilbrium at potential GDP will need to be out by bilion. (Enter your response rounded to the nearest whole number) 6 7 8 5

Answer 1

Delta Y = 300 & billion delta G times Govt multiplies = delta y delta G = 300/5 = 60 $ billion Govt spending should increase by 60 $ billion. * delta T times Tax multiplies = delta y delta T = 300/4 = 75 Tax should cut by 75 $ billion.