Using fiscal policy in this first (and simplest model) to avoid the recession of 2009: GDP in 2009 was roughly $15,000 billion. You learned in Chapter 1 that GDP fell by approximately 3 percentage points in 2009.

a. How many billion dollars is 3 percentage points of

$15,000 billion?

b. If the propensity to consume were 0. 5, by how much would government spending have to have increased to prevent a decrease in output?

c. If the propensity to consume were 0. 5, by how much would taxes have to have been cut to prevent any decrease in output?

d. Suppose Congress had chosen to both increase government spending and raise taxes by the same amount in 2009. What increase in government spending and taxes would have been required to prevent the decline in output in 2009?