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2. Fiscal policy is sometimes criticized for having an implementation gap. Give evidence of an implementation gap from the information in the paragraph. 3. Calculate
2. Fiscal policy is sometimes criticized for having an implementation gap. Give evidence of an implementation gap from the information in the paragraph. 3. Calculate the maximum increase in GDP that could result from tax cut. Show your work. 4. Calculate the maximum increase in GDP that could result from the increase in government spending. Show your work. 5. Calculate the maximum increase in GDP that could result from the increase in government transfers. Show your work. 6. Based on your calculations, what is the Figure 1. Difference Between Potential GDP in CBO's Baseline and Actual GDP Withou maximum change in spending from the and With the Impact of the American Recovery and Reinvestment Act of 2009 AARA? Show your work. (Percentage difference in the fourth quarter of each year) 2
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