What is the best that can be done to keep gdp

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The basic facts about the path of GDP are as in problem 1. But there is now a one-period outside lag for government spending. Decisions to spend today are translated into actual spending only tomorrow. The multiplier for government spending is still 2 in the period that the spending takes place.

a. What is the best that can be done to keep GDP as close to target as possible each period?

b. Compare the path of GDP in this question with the path in problem 1 after policy actions have been taken.

Reference no: EM131136294

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