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The Deepest the Output Gap Was During the Great Recession xˉ\bar { x }

Question 7

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The deepest the output gap was during the Great Recession was -7.46 percent in July of 2009. Many believe that the multiplier used was 1.5. If this is true, what is xˉ\bar { x }
? What is xˉ\bar { x }
if the multiplier used was 1.25? What would the percent change in government expenditure be to close this gap assuming monetary policy is NOT being used?

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The multiplier is derived from the IS co...

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