Suppose that the current equilibrium GDP is $14.5 trillion, and that potential GDP is $14.4 trillion. Determine
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Question:
Suppose that the current equilibrium GDP is $14.5 trillion, and that potential GDP is $14.4 trillion. Determine what the government needs to do in terms of changing the government expenditure and the taxes. Will changing government purchases by $200 billion, or changing taxes by $200 billion, restore the economy to potential GDP? Explain
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