Hello, please help me to answer this question. Thank you in advance! 1. You are hired by the president who believe that the economy is operating at a level $30 billion beyond potential output. You are told that the marginal propensity to consume is 0.5 (note: assume that mpe = mpc)

1. The president is in doubt whether to use taxes or government budget to close the gap. What do you advise? Show your answer using the AP/AE model.
2. The president wants to compare other adviser's plan to increasing money supply from BI to close the inflationary gap. What do you advise? Show your answer graphically using the AP/AE model and the Money Market Diagram..