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Assume a infinitely elastic short-run aggregate supply. Consider the following economy: C=C + 4 / 10 x Y D I=I TR=TR G=G T= 1 /
Assume a infinitely elastic short-run aggregate supply. Consider the following economy:
- C=C + 4/10 x YD
- I=I
- TR=TR
- G=G
- T=1/2 x Y
- X=0
- M=0
Potential GDP is 1000, while current GDP is 1030, what is the change in autonomous net transfers that will close the output gap?
Round to two decimal places.
Note: You should assume that the mpc for this change in transfers is the same as for all other disposable income.
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