Exhibit 11-3
-In Exhibit 11-3,if the government wants to eliminate the recessionary gap it should _______ government spending by _______.

Question

Exhibit 11-3 
-In Exhibit 11-3,if the government wants to eliminate the recessionary gap it should _______ government spending by _______.

Quizplus · Accepted Answer

To eliminate the recessionary gap, the government should increase government spending by a multiple of the size of the gap, and the multiplier is (1 / MPC). Therefore, the government should increase government spending by $2 trillion x (1 - MPC) to eliminate the recessionary gap.

Exhibit 11-3 -In Exhibit 11-3,if the Government Wants to Eliminate the Recessionary