Suppose that real GDP is currently $13.88 trillion and potential real GDP is? $14.0 trillion, or a gap of $1,000 billion. The government purchases multiplier is 3.3, and the tax multiplier is

2.3.

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.)

Holding other factors constant, by how much will taxes have to be cut to bring the economy to equilibrium at potential GDP?

Taxes will need to be cut by $___ billion. (Enter your response rounded to the nearest whole number.)

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Solving for the Increase in Government Spending and Tax Cut Given Real GDP 1388 trillion Potential G... View the full answer