Economics Homework Help

Consider the following economic data to answer #10-13.

Unemployment rate= 4%

Inflation rate=

2%

Actual GDP= $17 trillion

Growth rate= 2%

Potential GDP= $20 trillion

Marginal Propensity to consume=.7

Based on the data, answer the following:

(5) 10. What data indicate there is a problem and why?

(2) 11. How much and what kind of gap is this economy experiencing? 

(3) 12. State a fiscal policy option to fix the problem. State a monetary policy option to fix the problem.

(5) 13. How much must spending change to close the gap? Show your calculations. (Hint: don’t forget the multiplier effect)