Answered: Assume potential GDP is 3,500 and…

Assume potential GDP is 3,500 and actual GDP is 3,050. If the consumption function is C=400+0.2Yd , how much does government expenditure need to rise by to close the output gap?

Survey Of Economics

10th Edition

ISBN:9781337111522

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter15: Fiscal Policy

Section: Chapter Questions

Problem 4SQP

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Question

Assume potential GDP is 3,500 and actual
GDP is 3,050. If the consumption function is
C=400+0.2Yd, how much does
government expenditure need to rise by to
close the output gap?

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