Facing recessionary gap-using fiscal policy

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Reference no: EM131082018

Assume we are facing a recessionary gap (RG) of $20 million.

Explain the tools the government has at its disposal to close the gap, using FISCAL policy and in what direction it would use them, given that we have a RG (increase, decrease?). Give the exact dollar values needed to close the gap. Assume that the MPC is 0.4.

If government spends $10 million, how much income will be generated?

Reference no: EM131082018

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