Question

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Suppose the government enacts a stimulus program composed of $500 billion of new government spending and $200 bllion of tax cuts for an economy currently producing a GDP of $14,000 billion f all of the new spending occurs in the current year and the government expenditure multiplier is 1.8, the expenditure portion of the stimulus package will add percentage points of extra growth to the economy. (Round your response to two decimal places) Cazenovia is in the midst of a bad recession, and its Congress has placed economic recovery at the top of its political agenda. Different expansionary fiscal policies are currently being examined, but members of Congress are aware of the problems associated with large, sustained government deficits and will not accept any proposal that increases the deficit by more than S4 million. After lengthy discussions, these are the final proposals: Plan A: Spend S4 million on highways Plan B: Reduce taxes by $4 million Assume the economy of Cazenovia is characterized by the following four equations in the short run: , (a constant) where Co 40 and Cy0.6 Using the government expenditure multiplier from the simple model presented in the chapter, the plan to spend S4 million on highways will increase Y (GDP) by smillion (dlick the following icon for help answering this question)

Answer 1

iuon Spend tay Cur DrP Sp erdi . Prc.reon TnC D p ×UQ per eentepe poin avo 14 ΔΟΟ oe 43

sorry.. only one quest.allowed