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The government notices that there is an output gap and decides to increase government spending with a stimulus package of $4 trillion in hopes that it will spur growth and stop unemployment.
1. What is the new level of GDP (as determined by aggregate expenditure)?
2 Calculate the Keynesian Multiplier.
The price level now adjusts to get us to a new short-run equilibrium.
3 What is the new short-run equilibrium (price level and GDP)?
4 What is the new output gap?
5 Assume that the government is done spending (as is other autonomous expenditure items). What must change to get us to long-run equilibrium?
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What are the costs and difficulties of such an operation? The direct costs are administrative, cooperative and storage costs, whereas the societal costs include misallocation,
1. Cost minimizing firms must be profit maximizing as well. False, why??
Which of the following is a free good? Fresh water, forests in the northwestern United States, the advice of economists, or none of the above?
Uses of Balance of payments account: It removes the uncertainty associated with the flexible exchange rate regime and brings stability. It also indirectly imposes some anti inf
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negative slope on ppf represents what?
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