Suppose that real GDP is currently $13.3 trillion and potential real GDP is $14.0 trillion, or a gap of $700 billion. The government purchases multiplier is 5.0, and the tax multiplier is 4.0. Holding other factors constant, by how much will government purchases need to be increased to bring the economy to equilibrium at potential GDP? Government spending will need to be increased by $______ billion. (Enter your response rounded to the nearest whole number.)

Suppose that real GDP is currently $13.3 trillion and potential real GDP is $14.0 trillion, or a gap of $700 billion. The government purchases multiplier is 5.0, and the tax multiplier is 4.0. Holding other factors constant, by how much will government purchases need to be increased to bring the economy to equilibrium at potential GDP? Government spending will need to be increased by $______ billion. (Enter your response rounded to the nearest whole number.)

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter11: Fiscal Policy

Section: Chapter Questions

Problem 1.4P

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Question

am. 107.

Suppose that real GDP is currently $13.3 trillion and potential real GDP is $14.0
trillion, or a gap of $700 billion. The government purchases multiplier is 5.0, and the
tax multiplier is 4.0.
Holding other factors constant, by how much will government purchases need to be
increased to bring the economy to equilibrium at potential GDP?
Government spending will need to be increased by $
rounded to the nearest whole number.)
billion. (Enter your response

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