Suppose that real GDP is currently $1.24 trillion, potential GDP is $1.33 trillion, the government purchases multiplier is 2, and the tax multiplier is - 1.2. a. Holding other factors constant, government purchases will need to be increased by $ 0.045 trillion to bring the economy to equilibrium at potential GDP. (Round to four decimal places as needed.) b. Holding other factors constant, taxes have to be cut by $ 0.075 trillion to bring the economy to equilibrium at potential GDP. (Round to four decimal places as needed.) c. Construct an example of a combination of increased government spending and tax cuts that will bring the economy to equilibrium at potential GDP. The combination of increasing government spending by V and cutting taxes by $ trillion will bring the economy to equilibrium at potential GDP. (Round to four decimal places as needed.) $0.1080 trillion $0.0900 trillion $0.0180 trillion $0.1800 trillion

Suppose that real GDP is currently $1.24 trillion, potential GDP is $1.33 trillion, the government purchases multiplier is 2, and the tax multiplier is - 1.2. a. Holding other factors constant, government purchases will need to be increased by $ 0.045 trillion to bring the economy to equilibrium at potential GDP. (Round to four decimal places as needed.) b. Holding other factors constant, taxes have to be cut by $ 0.075 trillion to bring the economy to equilibrium at potential GDP. (Round to four decimal places as needed.) c. Construct an example of a combination of increased government spending and tax cuts that will bring the economy to equilibrium at potential GDP. The combination of increasing government spending by V and cutting taxes by $ trillion will bring the economy to equilibrium at potential GDP. (Round to four decimal places as needed.) $0.1080 trillion $0.0900 trillion $0.0180 trillion $0.1800 trillion

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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