Government give in tax cut to eliminate this gap

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Reference no: EM1312142

Q. Calculate GDP gap if in an economy the unemployment rate is 9.4%, MPC = .75 also the Full employment GDP = $20,000 using okun's law (for every one percent of cyclical unemployment the GDP loss is 2 times). Elucidate how this GDP gap with the help of a graph. You can use either the expenditure model or AD/AS model to elucidate how the graph. Label the graph clearly.

Calculate the regular expenditure multiplier also the net tax multiplier.

Elucidate how much money should the government spend to eliminate this gap?

Elucidate how much money should the government give in tax cut to eliminate this gap?

Reference no: EM1312142

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