The following equations characterize an open economy in billions of dollars. C = 100 + .6 (Y – T) T = 40 I = 48 G = 64 X = 76 M = 20 + .15Y (k) Suppose the full employment level of real GDP is $350. Does a recessionary gap or an inflationary gap exist? How can the government eliminate the gap by altering government expenditures? How can the government eliminate the gap by altering taxes? Note: State the amount and direction (increase or decrease) of taxes or government expenditure needed to eliminate the gap.

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i Recessionary gap the real GDP of 330 is less than the potential GDP ii The governm... View the full answer