1. The parliament of the Republic of Baconia has hired you as an economic consultant and has provided you with the following data on current economic conditions:

Real GDP = $8.75 trillion

Unemployment rate = 6.2%

The BBEA (Baconia Bureau of Economic Analysis) has determined the following values:

Real potential GDP = $9.1 trillion

Natural rate of unemployment = 5.7%

The Baconia Parliament has been deadlocked on what type of fiscal policy to pursue to correct the economy's problems. Other than being an expert on the country's chief export, you don't know much about Baconia beyond the data just provided to you.

1. What would you recommend the Baconia Parliament do in terms of its government spending and its tax rates to bring its economy toward full employment?
2. If the Parliament pursues your recommended policies, what will it imply for the Baconia federal budget?
3. Many pig farmers in Baconia are considering expanding their farms and borrowing to purchase expensive new pig-grooming equipment; how might your recommended policies impact their expansion plans?