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Please show your work C = 300 + 0.8Yd; C = consumption function; Yd (Y-T) = disposable income I = 200; I = Investment G
Please show your work
C = 300 + 0.8Yd; C = consumption function; Yd (Y-T) = disposable income I = 200; I = Investment G = 400; G = Government expenditure T = 200; T = Tax revenue Also assume that Yf = Full employment GDP (Potential GDP) = 5,000
The government spending needed to bridge the GDP gap you found in statement 8.7 above
would be _____________
Hint: It is also called recessionary or inflationary gap depending on whether the economy is in
state of recession or inflation.
a. 400
b. 350
c. 260
d. 250
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