Essay
Use the table below to answer the following questions.Assume that investment, net exports, government expenditures, and taxes do not change with changes in real GDP. 
(a) What is the size of the multiplier in this economy?
(b) If taxes are zero, government expenditures are $10, investment is $6, and net exports are zero, what is the equilibrium GDP?
(c) If taxes are $5, government expenditures are $10, investment is $6, and net exports are zero, what is the equilibrium GDP?
(d) Assume investment is $50, taxes are $50, net exports and government expenditures are each zero.The full-employment level of real GDP is $340.How much of a reduction in taxes is needed to eliminate the recessionary gap?
(e) Assume that investment, net exports, and taxes are zero.Government expenditures are $20 and the full-employment level of real GDP is $330.By how much must government spending be reduced to eliminate the inflationary gap?
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(a) To find the size of the multiplier, ...View Answer
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