xpa Student Question x 1068ick-m 1512697093973 0AAA6B0 om/at/servlet/quiz eQuiz&

Question

xpa Student Question x 1068ick-m 1512697093973 0AAA6B0 om/at/servlet/quiz eQuiz&quiz; probGuid Q4PLCOA801010000003b2576100b00008 ctxramcleod-01 TAYLOR Kelley ciples of Macro. Fall 2017 Reviews Discussionc The Influence of Monetary and Fiscal Policy on Aggregate Demand: Algorithmic End of Chapter Graded Aasignment l Due Sunday 12 10.17 at 1145 PM Keep the Highest /1 & Problems and Applications Q8 An economy is eperating with output $200 billion above its natural level, and fiscal policymakers want to dose this expansionary gap. The centrel bark grees to adjust the money supply to hoid the interest rate constant, so there is na arowding out. The marginal propensity to consume is 4'5, and the level is completely fixed To dose the expansionary gap, the govemment would need to ding by S to search F5 F6 FB 9F10 F11 F12 PriScr InsertDelete

Explanation / Answer

to close the expansionary gap the government should decrease its spendings so that the aggregate demand is also decreased ,

now the decrease in government spendings required is given by

200 billion * value of the multiplier

= 200*0.8 = 160 billion

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