RGPP1012Using the above graph (assume RGDP amounts are in trillions of dollars), whichpolicy would return the economy to Potential GDP (assume the multiplier is 4)?increase taxes by $48 trillionincrease taxes by $0.5 trilliondecrease government spending by $2 trillionincrease government spending by $8 trillion LRAS1.2SASADRGPP10

Given multiplier = 4 Output gap = Actual output – potential output = 12 – 10 = 2 As there is…

Answered: Using the above graph (assume RGDP…

Using the above graph (assume RGDP amounts are in trillions of dollars), which policy would return the economy to Potential GDP (assume the multiplier is 4)?

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

RGPP
10
12
Using the above graph (assume RGDP amounts are in trillions of dollars), which
policy would return the economy to Potential GDP (assume the multiplier is 4)?
increase taxes by $48 trillion
increase taxes by $0.5 trillion
decrease government spending by $2 trillion
increase government spending by $8 trillion

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