Business, 30.03.2021 17:40 carlo123

An economy is operating with output $50,000,000 below the natural rate of output. Fiscal policy makers want to close this recessionary gap. The central bank agrees to adjust the money supply to keep the interest rate constant, so there will be no crowding out. The marginal propensity to consume is 0.75, and the price level is completely fixed in the short run. 1. How much would government spending need to increase (use a negative number if it needs to decrease) to restore the economy to full employment?
2. How much would taxes need to increase (use a negative number if it needs to decrease) to restore the economy to full employment?

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An economy is operating with output $50,000,000 below the natural rate of output. Fiscal policy make...

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