Assume the actual level of GDP is $12b less than the potential level of output. In this economy the marginal propensity is consume is 0.7, the marginal propensity to import is 0.1 and the government collects autonomous taxes valued at $6b and taxes income at the rate of 19 cents in the dollar. Using this information answer the following:

a)Calculate the taxation multiplier

b)Calculate the expenditure multiplier

c)By how much do autonomous taxes need to change in order to eliminate the output gap?

d)By how much would government expendituresneed to change in order to eliminate the output gap?

e)Compare the impacts of both scenarios c) and d) on the balance of the government budget which prior to this had been in surplus by $5b. If you had to advise the government on adoptingoneof these approaches which one would you choose? Explain why.