You are hired by the Council of Economic Advisors (CEA) as an economic consultant. The chairperson of the CEA tells you that she believes the current unemployment rate is too high. The unemployment rate can be reduced if aggregate output increases. She wants to know what policy to pursue to increase aggregate output by 300 billion TL. The best estimate she has for the MPC is 0.8. Which of the following policies should you recommend? a) Increase government purchases by 75 billion TL. b) Reduce taxes by 75 billion TL. c) Reduce taxes by 75 billion TL and to increase government purchases by 75 billion TL. d) Reduce the budget deficit by 300 billion TL

You are hired by the Council of Economic Advisors (CEA) as an economic consultant. The chairperson of the CEA tells you that she believes the current unemployment rate is too high. The unemployment rate can be reduced if aggregate output increases. She wants to know what policy to pursue to increase aggregate output by 300 billion TL. The best estimate she has for the MPC is 0.8. Which of the following policies should you recommend? a) Increase government purchases by 75 billion TL. b) Reduce taxes by 75 billion TL. c) Reduce taxes by 75 billion TL and to increase government purchases by 75 billion TL. d) Reduce the budget deficit by 300 billion TL

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter11: Managing Aggregate Demand: Fiscal Policy

Section: Chapter Questions

Problem 2TY

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