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Llana [10]
3 years ago
12

An economy is operating with output $300 billion below its natural rate, and fiscal policymakers want to close this recessionary

gap. The central bank agrees to adjust the money supply to hold the interest rate constant, so there is no crowding out. The marginal propensity to consume is 0.75, and the price level is completely fixed in the short-run. (a) In what direction and by how much would government spending need to change to close the recessionary gap
Business
1 answer:
saw5 [17]3 years ago
8 0

Answer and Explanation:

a. The computation is shown below;

As we know that

Y/G = 1 ÷ (1-MPC)

Here

Y = $300 billion,

MPC = 0.75

So,  

300 ÷ G = 1 ÷ 0.25

G = $75

So the government should rise the spending by $75 in order to close out the recessionary gap

So, the government should increase the spending by $30 to close the recessionary gap.

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Entry to record the purchase will include <u>a debit to supplies and a credit to accounts payable</u>.

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2 years ago
Approximately what percent of regular army soldiers (excluding army reserves and national guard) currently serve in infantry uni
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The Heating Division of Kobe International produces a heating element that it sells to its customers for $40 per unit. Its varia
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Answer:

$48

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