Question

Real GDP equals $100 billion, potential output equals $160 billion, and the marginal propensity to consume is 0.75. The economy faces a recessionary gap. To close the gap, government spending and/or transfers would need to increase. Spending would need to change by $ billion to close the gap. Transfers would need to change by $ billion to close the gap.

          Real GDP equals $100 billion, potential output equals $160 billion, and the marginal propensity to consume is 0.75.
The economy faces a recessionary gap. To close the gap, government spending and/or transfers would need to increase.
Spending would need to change by $ billion to close the gap.
Transfers would need to change by $ billion to close the gap.

Real GDP equals 100 billion, potential output equals160 billion, and the marginal propensity to consume is 0.75.
The economy faces a recessionary gap. To close the gap, government spending and/or transfers would need to increase.
Spending would need to change by billion to close the gap.
Transfers would need to change by billion to close the gap.

Added by Michael M.

Principles of Economics

Gregory Mankiw 8th Edition

Instant Answer

Solved by Expert Jennifer Stoner

04/20/2023

Step 1

The recessionary gap is the difference between potential output and real GDP. Recessionary gap = Potential output - Real GDP Recessionary gap = $160 billion - $100 billion Recessionary gap = $60 billion Show more…

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Real GDP equals $100 billion, potential output equals $160 billion, and the marginal propensity to consume is 0.75 . The economy faces gap. To close the gap, government spending and/or transfers would need to Spending would need to change by $ billion to close the gap. Transfers would need to change by $ billion to close the gap. Real GDP.equals $100 billion, potential output equals $160 billion, and the marginal propensity to consume is 0.75. Macmillan Learning The economy faces a recessionary -gap. To close the gap, government spending and/or transfers would need to increase- Spending would need to change by $ billion to close the gap Transfers would need to change by $ billion to close the gap.