The council of economic advisors

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Suppose the Council of Economic Advisors (CEA) hired you as an Economist (Economic consultant). The head of the council tells that she believes the current unemployment rate of 5.5% is not great. They would like to increase real aggregate output (RGDP). She wants to know what policy to pursue to increase RGDP by $1 trillion ($1,000 billion). The best estimate she gave you is the value of MPC = 0.75. Which of the following policies should you recommend and why? You need to show your work of estimations and explain in words. a. Increase government expenditure (G) by $300 billion b. Reduce taxes by $250 billion c. Reduce taxes by $250 billion and increase govt. expenses by $250 billion d. Increase G by $250 billion

Reference no: EM131083428

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