Inflationary Gap Assignment | Homework For You
Q8. If the economy is growing beyond potential real GDP (Inflationary gap), which of the following would be an appropriate fiscal policy to bring the economy back to long-run aggregate supply (potential/full employment output)?
A) An increase in the money supply and a decrease in interest rates.
B) An increase in government purchases.
C) An increase in oil prices.
D) An increase in taxes.
Q9.For a model economy, the mpc (marginal propensity to consume) is 0.8
Current GDP is $60 million. Potential GDP is $100 million. To reach full employment (overcome
recessionary gap), government spending must
A) decrease by $40 million
B) increase by $8 million
C) decrease by $8 million
D) Increase by $40 million. Get Economics homework help today