An economy is in equilibrium at a real GDP of 850, but current estimates put potential output at Y_p= 900.

Question 7 [12 points] An economy is in equilibrium at a real GDP of 850, but current estimates put potential output at Yp = 900. a) Answer the following fill-in the blank question. When Y = 850 and Yp = 900 there is a (Select One) gap and the size of the gap is equal to 0 (Select One) inflationary b) Answer the following fill-in the blank girecessionary Note: Keep as much precision as possible during your calculations. Your final answer should be accurate to at least three decimal places. Research suggests that the MPC is 0.7, the MPM is 0.05, and the net tax rate is 0.2. Therefore, the slope of AE is 0 and the multiplier is 0 which means that G must be increased by 0 to remove the gap and achieve equilibrium. c) If the government preferred to change its net tax rate to eliminate the gap, and not change government expenditure, what new tax rate would be required to eliminate the gap? Note: Keep as much precision as possible during your calculations. Your final answer should be accurate to at least three decimal places. Tax rate required to eliminate the gap = 0Question 7 [12 points] An economy is in equilibrium at a real GDP of 850, but current estimates put potential output at Yp = 900. a) Answer the following ll-in the blank question. When Y = 850 and Yp = 900 there is a 7 gap and the size of the gap is equal to g. b) Answer the following ll-in the blank question. Note: Keep as much precision as possible during your calculations. Your nal answer should be accurate to at least three decimal places. Research suggests that the MPC is 0.7, the MPM is 0.05, and the net tax rate is 0.2. Therefore, the slope of AE is \"and the multiplier is \"which means that G must be increased by \"to remove the gap and achieve equilibrium. c) If the government preferred to change its net tax rate to eliminate the gap, and not change government expenditure, what new tax rate would be required to eliminate the gap? Note: Keep as much precision as possible during your calculations. Your nal answer should be accurate to at least three decimal places. Tax rate required to eliminate the gap =