00:01
So now we're talking multipliers, right? so the first thing we want to think about is the output gap, right? the output gap here is equal to 400 billion, which is equal to the 13 .5 trillion minus the 13 .1 trillion, right? the economy is running 400 billion slow.
00:23
So for a, we want to think about a change in government spending times the multiplier of two, which is equal to 400 billion.
00:31
And that implies that the change in government spending has to be $200 billion.
00:36
For b, we're thinking about a change in taxes times minus 1 .6, right, to get $400 billion.
00:44
And that means that the change in taxes, well, this one i am going to have to put into my calculator, is going to be negative $250 billion.
00:56
So remember, taxes need to be cut.
00:59
So we need to reduce taxes by $250 billion...