Assume the economy in the United States has a GDP of $13.4 trillion, an unemployment rate of 4.2%, and an inflation rate of 4.2%. Unemployment has been slowly dropping over the last 16 months and inflation has been slowly rising. Economists predict the MPC to be .80 in “good times” and .75 in “bad times.” Those same economic advisors believe the NRU to be 5%. Based on this information, answer the following questions: Please Explain answers in detail.

i. Is this economy facing “good times” or “bad times?”

ii. What is the multiplier in this economy?

iii. Assume the government decides to solve the problem and cuts spending by $100 billion ($.100 trillion). Will this change bring the economy to a Full Employment GDP?

iv. If in your answer to Question 3, you explained that the economy would not be at full employment with that change (which would be the correct answer), what problem would the economy now be facing?

Answer rating: 100% (QA)

Solution i Guien that the Elonomy is operateing over the potential in Unemploymeut rete below the ma... View the full answer