State what fiscal policy you would recommend to eliminate the inflationary or recessionary gap in the following
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a. Recessionary gap of $800; mpe = .5.
b. Inflationary gap of $1,500; mpe = .8.
c. Real GDP = $10,200; potential GDP = $9,000; mpe = .2.
d. Real GDP = $40,500; potential GDP = $42,000; mpe = .7.
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a If the mpe is 5 the multiplier is 2 Because there is a recessionary gap ...View the full answer
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