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Use the information above to solve the following problem. (3 marks) a. Identify whether there is a recessionary gap or an inationary gap and the
Use the information above to solve the following problem. (3 marks) a. Identify whether there is a recessionary gap or an inationary gap and the amount of the output gap. b. Given that leakages are 40%, what is the amount of the multiplier on any new spending? C. Using the multiplier, what change in business investment spending would change GDP enough to eliminate the output gap? d. What new rate of interest would bring about this change in business investment? How much would GDP change if the government decreased taxes by $100 million dollars and leakages are 70%? (1 mark)
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