00:01
Alright, so for part a, our economy here is experiencing a recessionary output gap.
00:08
This is because our current output of $400 billion is less than our full employment output.
00:18
In other words, our economy is producing less than its potential, which is a characteristic of a recessionary gap.
00:25
For b, for i, to calculate our minimum change, we first need to calculate our output gap.
00:32
This is the difference between our full employment output and our current output.
00:37
So in this case, we need to take 500 billion minus 400 billion to get $100 billion.
00:47
Since our multiplier is 1 over 1 minus mpc, we're going to get that our multiplier is 5.
00:54
So we need to take our 100 billion and divide it by 5 to get $20 billion.
01:00
So our government needs to increase its spending by $20 billion...