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Prim Preferences Help Lab 4 (Question 7) Name: Yazan Al Absi Date: 2020-10-23 Question 7 [12 points] An economy is in equilibrium at a real GDP of 800, but current estimates put potential output at Yp = 750. a) Answer the following ll-in the blank question. When Y = 800 and Yp = 750 there is a (Select One) gap and the size of the gap is equal to 0 b) Answer the following ll-in the blank question. Note: Keep as much precision as possible during your calculations. Your nal answer should be accurate to at least three decimal places. Research suggests that the MP0 is 0.8, the MPM is 0.15, and the net tax rate is 0.2. Therefore, the slope of AE is 0 and the multiplier is 0 which means that G must be decreased by 0 to remove the gap and achieve equilibrium. c) If the government preferred to change its net tax rate to eliminate the gap, and not change government expenditure, what new tax rate would be required to eliminate the gap? Note: Keep as much precision as possible during your calculations. Your nal answer should be accurate to at least three decimal places. Tax rate required to eliminate the gap = 01 Ofcial 'I'Ime: 11:20:11 SAVE AND CLOSE