Congratulations one more time. You have been appointed chair of Economic Advisers in Fantasyland. Income is currently $600,000, unemployment is 5 percent, and there are signs of coming inflation. You rely on your research assistant for specific numbers. He tells you that potential income is $564,000 and the mpe is 0.5. a. The government wants to eliminate the inflationary gap by changing expenditures. What policy do you suggest? Descrease government spending by $_________________ or increase taxes by $_. b. Your research assistant comes in and says "Sorry, I meant that the mpe is 0.8." Redo your calculations for part a. Descrease government spending by $ or increase taxes by $_
Congratulations one more time. You have been appointed chair of Economic Advisers in Fantasyland. Income is currently $600,000, unemployment is 5 percent, and there are signs of coming inflation. You rely on your research assistant for specific numbers. He tells you that potential income is $564,000 and the mpe is 0.5. a. The government wants to eliminate the inflationary gap by changing expenditures. What policy do you suggest? Descrease government spending by $_________________ or increase taxes by $_. b. Your research assistant comes in and says "Sorry, I meant that the mpe is 0.8." Redo your calculations for part a. Descrease government spending by $ or increase taxes by $_
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
G, 7
Economics
Transcribed Image Text:Congratulations one more time. You have been appointed chair of Economic Advisers in Fantasyland.
Income is currently $600,000, unemployment is 5 percent, and there are signs of coming inflation. You
rely on your research assistant for specific numbers. He tells you that potential income is $564,000 and
the mpe is 0.5.
a. The government wants to eliminate the inflationary gap by changing expenditures. What policy do you
suggest?
Descrease government spending by $_________________ or increase taxes by $_.
b. Your research assistant comes in and says "Sorry, I meant that the mpe is 0.8." Redo your calculations
for part a.
Descrease government spending by $
or increase taxes by $_
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