Refer to the table below in answering the questions which follow:

(1)

Possible levels

of employment,

millions

(2)

Real domestic

output,

billions

(3)

Aggregate Expenditures

(C_a+I_g+X_n+G),

billions

90

100

110

120

130

$500

550

600

650

700

$520

560

600

640

680

a.If full employment in this economy is 130 million, will there be an inflationary expenditure gap or a recessionary expenditure gap?What will be the consequence of this gap?By how much would aggregate expenditures in column 3 have to change at each level of GDP to eliminate the inflationary expenditure gap or recessionary expenditure gap?Explain.What is the multiplier in this example?

b.Will there be an inflationary expenditure gap or recessionary expenditure gap if the full-employment level of output is $500 billion?Explain the consequences.By how much would aggregate expenditures in column 3 have to change at each level of GDP to eliminate the gap?Explain.What is the multiplier in this example?

c.Assuming that investment, net exports, and government expenditures do not change with changes in real GDP, what are the sizes of the MPC, the MPS, and the multiplier?