Would cause unemployment to change by what percentage

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  1. According to Okun's Law, if the normal rate of growth of GDP is 3% and the current unemployment rate is 6%, an increase in GDP growth to 4% would cause unemployment to change by what percentage?
  2. When total output, income, employment, and trade decline for 6 to 12 months, the economy is in what part of the business cycle?
  3. Which has a larger effect on aggregate demand: an increase in government expenditure or an equal sized decrease in taxes? Explain your answer.
  4. To eliminate a recessionary gap, what fiscal policy should the government pursue? Be specific.
  5. Indicate which of the following is expansionary OR contractionary fiscal policy:
  • Increasing income tax
  • Bailing out the auto industry
  • The purchase of military helicopters

Reference no: EM13796278

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