Consider the following multiplier model:
AE = 8,000 + 0.75Y,and potential output equals 35,000.
(1)Calculate equilibrium output.
(2)State what fiscal policy you would recommend to eliminate the inflationary or recessionary gap.
(3)Calculate the change in government spending required to eliminate the gap.

Question

Quizplus · Accepted Answer

The Answer of Consider the following multiplier model:
AE = 8,000 + 0.75Y,and potential output equals 35,000.
(1)Calculate equilibrium output.
(2)State what fiscal policy you would recommend to eliminate the inflationary or recessionary gap.
(3)Calculate the change in government spending required to eliminate the gap.

Consider the Following Multiplier Model