Unformatted text preview: Queetlon 7 [12 points]
An elmnorrly is in equilibrium at a real GDP of 850. but current estimates put potential oulput atYp E 900. a] Answer the lollowirg ﬁll-in the blank queslion.
When Y = 850ande= Soothereis a winery gapandlne sizeoﬂhegap is equalln 50 . b) Answer lhe following ﬁll-in ll1e blank question
Neill Keep as much precision as pc3sible during your calculalions. Your ﬁnal answm should be aculralleln atleasllhree decimal places. Research suggesls Inat lhe MP0 is I175, the MPM is 0.1. and the netlax rate is 0.2.Tl1erefure.lhe slope ofAE is 0.5 and the multiplier is 2 which means lhet G must be increased by 25 lo remove the gap
and achieve equilibrium. :1 ll lne government preferred In change Ils net lax ralle lo ellminate lne gap, and not change gnvemment expenditure. M31 new lax rale would be required In eliminale the gap?
NOIIL Keep as much precnslun as pc33lble during your calwlalions. Your ﬁnal answer should be aculraleln atleasllhree decimal places. Tal rails required lloelirrlinale ll'le gap = 0.163 Marking: (a) Gal: mo Yhur answer was: recessionaryI Congramlatiens! ‘l‘bu have entered ll'le correct answer. ...
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- Winter '08
- Decimal, 2000 albums, decimal places, ll'le correct answer, new lax rale, Ils net lax