4) Suppose an economy is producing real GDP of $600 billion. Potential GDP is equal to $450 billion, and the MPC is equa

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4 Suppose An Economy Is Producing Real Gdp Of 600 Billion Potential Gdp Is Equal To 450 Billion And The Mpc Is Equa 1 (30.74 KiB) Viewed 11 times

4) Suppose an economy is producing real GDP of $600 billion. Potential GDP is equal to $450 billion, and the MPC is equal to 0.8. i) [2 points] What kind of a gap (or problem) is this country experiencing? ii) [4 points] What policy action do you suggest the government to take to eliminate the gap? State both the specific type of policy action and its size. Show your work for partial credit. 5) [4 points] Suppose that the euro was trading for $1.15 U.S. dollar on November 12 2021, and then the price of euro decreased to $1.12 on November 24 2021. How would this change affect U.S. exports to Europe: the demand for US goods and services by Europeans? How would this change affect U.S. aggregate demand curve?