Author Question: Assume that full-employment real GDP is Y = 1,200 billion, the current equilibrium real GDP is Y = ... (Read 104 times)

yoooooman · **on:** Jun 30, 2018

Assume that full-employment real GDP is Y = 1,200 billion, the current equilibrium real GDP is Y = 1,600 billion, and the MPC = 0.8 . In order to bring the economy to a full-employment real GDP,
a. a recessionary gap must be bridged by increasing aggregate expenditures by 80 billion.
b. an inflationary gap must be bridged by cutting aggregate expenditures by 80 billion.
c. nothing is needed to bring the economy into full employment equilibrium.
d. a recessionary gap must be bridged by increasing aggregate expenditures by 400 billion.
e. an inflationary gap must be bridged by cutting aggregate expenditures by 400 billion.

Question 2

Although it has considerable political independence, the Fed is legally a branch of the U.S. Treasury Department.
a. True
b. False
Indicate whether the statement is true or false