Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

In the winter of 2020/2021, Congress debated, and voted on, various new stimulus proposals. Assume policymakers' goal was to make up for the decline in

In the winter of 2020/2021, Congress debated, and voted on, various new stimulus proposals. Assume policymakers' goal was to make up for the decline in economic activity in 2020 and restore GDP to where it would have been in the absence of the pandemic. Because real GDP (in 2012 dollars) went from $19.036 trillion in 2019 to $18.509 trillion in 2020, this means restoring GDP to the ($19.036 1.0229 =) $19.472 trillion it would have reached had it continued growing at the same rate as in 2019. Given a GDP deflator of 1.13769 in 2020, this means a nominal GDP (in 2020 dollars) of ($19.472 1.13769 =) $22.153 trillion (in 2020 dollars), which is $1.093 trillion higher than the actual 2020 nominal GDP of $21.060 trillion (in 2020 dollars).the consensus estimate for the government-expenditures multiplier is 1.5. 1 As you know, b) How large a fiscal stimulus would have been necessary to restore the economy to where it would have been in the absence of the pandemic, if such a stimulus were based exclusively on a government spending increase (not offset by a commensurate tax increase)? Give your answer both in dollars and as a percentage of GDP

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

The Economic Development Of Latin America Since Independence

Authors: Luis Bértola, Luis Bértola

1st Edition

0191638242, 9780191638244

More Books

Students also viewed these Economics questions