Explain how to eliminate the inflationary gap

Reference no: EM13225133

Income is currently 600,000 unemployment is 5 percent, and there are signs of coming inflation. You rely on ur research assistant for specific numbers. He tells you that potential income is 564,000 and the mpe is .5.

a)The government wants to eliminate the inflationary gap by changing expenditures. What policy do you suggest?

b)by how much will unemployment change after you policy has taken effect?

Reference no: EM13225133

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