Price level is completely fixed in the short run

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An economy is operating with output $400 billion below its natural level, and fiscal policymakers want to close this recessionary gap. The central bank agrees to adjust the money supply to hold the interest rate constant, so there is no crowding out. The marginal propensity to consume is 4/5, and the price level is completely fixed in the short run.

To close the recessionary gap, the government would need to_______ spending by billion.

Reference no: EM13773959

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