Statistics Unit_7_Homework_MM204_05

Statistics Unit_7_Homework_MM204_05 -...

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Roderick_April_Unit_7_Homework_MM204_05 #3 a. The economy will face an inflationary gap. Policy makers could use contractionary fiscal policies to move the economy back to potential output. b . The economy will face a recessionary gap. Policy makers could use expansionary fiscal policies to move the economy back to potential output. c. The economy will face an inflationary gap. Policy makers could use contractionary fiscal policies to move the economy back to potential output. d. The economy will face a recessionary gap. Policy makers could use expansionary fiscal policies to move the economy back to potential output. #5 a . The change in government purchases 1/ (1-0.75) =4 an increase in government purchases of $15 billion will increase real GDP by $60 billion and close the recessionary gap to close the gap. The change in government transfers necessary to close the gap is 0.75/ (1-0.75) =3, the government should increase transfer by $20 billion. b
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This note was uploaded on 08/05/2008 for the course MM 207 taught by Professor Hill during the Spring '08 term at Kaplan University.

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