Given the macro economic data below, draw a graph to illustrate if there is arecessionary gap in the given economy.Real GDP $1000BConsumption (100K is Autonomous) $600BInvestment $100BGovernment Spending $200BExport $50BImport $50BMarginal Propensity to Consume 0.50 AD (Expenditure) 45 degree AD = AS $ 1000B AS (Real GDP) a. Calculate the size of the recessionary gap in the economy. b. What would happen to the recessionary gap if the government cut incometaxes by $50B? c. What would happen to the recessionary gap if the Fed increased discountrates? Explain your answer.
Given the macro economic data below, draw a graph to illustrate if there is arecessionary gap in the given economy.Real GDP $1000BConsumption (100K is Autonomous) $600BInvestment $100BGovernment Spending $200BExport $50BImport $50BMarginal Propensity to Consume 0.50 AD (Expenditure) 45 degree AD = AS $ 1000B AS (Real GDP) a. Calculate the size of the recessionary gap in the economy. b. What would happen to the recessionary gap if the government cut incometaxes by $50B? c. What would happen to the recessionary gap if the Fed increased discountrates? Explain your answer.
Chapter9: Aggregate Demand
Section: Chapter Questions
Problem 4.8P
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Given the macro economic data below, draw a graph to illustrate if there is a
recessionary gap in the given economy.
Real GDP $1000B
Consumption (100K is Autonomous) $600B
Investment $100B
Government Spending $200B
Export $50B
Import $50B
Marginal Propensity to Consume 0.50
AD (Expenditure) 45 degree AD = AS
$ 1000B AS (Real GDP)
a. Calculate the size of the recessionary gap in the economy.
b. What would happen to the recessionary gap if the government cut income
taxes by $50B?
c. What would happen to the recessionary gap if the Fed increased discount
rates? Explain your answer.
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