1. Calculate GDP loss if equilibrium level of GDP is $8,000, unemployment rate 8.8%, and the MPC is 0.80. Hint: (Use Okun's law to calculate GDP loss) a) How much money should the government spend to eliminate this GDP loss? b) Calculate the tax cut needed to eliminate this GDP loss.

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Q: na

A: When economy is at full employment or AD = AS = LRAS, the increase in tax rate will make Aggregate…

Q: supply-side economics

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A: Equilibrium income = $400 Full employment income = $650

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