Question: I don't know how to do them. Show your work please Fiscal Policy Practice Congress uses discretionary fiscal policy to the 1. Negative output gap

I don't know how to do them. Show your work please

Fiscal Policy Practice Congress uses discretionary fiscal policy to the 1. Negative output gap manipulate the following economy (MPC = .8) 2. Expansionary 1. What type of gap? 2. Contractionary or 3. Increase government spending OR decrease Price level Expansionary needed? taxes 3. What are two options to fix the gap? 4. What is the least 4. $500 billion= 5 x ? amount of initial government spending $100 billion to close gap? $500 $1000FE (1/1-.8= 1/.2= 5 Real GDP (billions) Fiscal Policy Practice Congress uses discretionary fiscal policy to the 1. manipulate the following economy (MPC = .5) LRAS 1. What type of gap? Price level AS 2. Contractionary or 2 Expansionary needed? Pe 3. What are two options to fix the gap 3. 4. How much needed to close the gap through taxes? 4. $20 billion= tax multiplier x ? AD MPC/MPS= 1 SSOFE $100 Real GDP (billions) Cutting Tax Practice Congress uses discretionary fiscal policy to the 1. manipulate the following economy (MPC = .5) LRAS 1. What two options does the government have? 2 Price level 2. How much should they increase government spending? 3. How much should they 3. cut taxes? $80 $100FE Real GDP (billions)

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