3.6 3.4 Suppose real GDP is currently $12.5 trillion and potential real GDP is $13 trillion. If the presidentand Congress increased government purchases by $500 billion, what would be the result on theeconomy?3.5 If real GDP is $300 billion below potential GDP and the tax multiplier equals -1.5, then how muchwould the government need to change taxes to bring the economy to equilibrium at potential?3.6 Explain why the timing of fiscal policy may be more difficult than the timing of monetary policy.

3.6) Fiscal policy: It refers to the change in tax structure and government spending by the…

Answered: 3.6 Explain why the timing of fiscal…

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3.6 Explain why the timing of fiscal policy may be more difficult than the timing of monetary policy.

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter11: Managing Aggregate Demand: Fiscal Policy

Section11.A: Graphical Treatment Of Taxes And Fiscal Policy

Problem 3TY

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Question

3.6

3.4 Suppose real GDP is currently $12.5 trillion and potential real GDP is $13 trillion. If the president
and Congress increased government purchases by $500 billion, what would be the result on the
economy?
3.5 If real GDP is $300 billion below potential GDP and the tax multiplier equals -1.5, then how much
would the government need to change taxes to bring the economy to equilibrium at potential?
3.6 Explain why the timing of fiscal policy may be more difficult than the timing of monetary policy.

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