Using the aggregate expenditures model, answer the questions below to show how government fiscal policy could eliminate either a recessionary expenditure gap or an inflationary expenditure gap. 6000 5000 4000 Aggregate expenditures (billions of dollars) 3000 2000 Full employment AEO 1000 0 45° 1000 2000 3000 4000 5000 6000 Real GDP (billions of dollars) Tools 1 Gap

What is the relative importance of government spending (G) in aggreagte demand and some factors that affect it?

If the economy is in a recessionary period how, specifically, might the government use their three tools?  three tools change the tax rate  change the level of govertment spending change transfer payments

Y                        C                      I                     G                       X                             $ 100               $ 120               $ 20                 $ 30                $ 10                             $ 300               $ 300               $ 20                 $ 30              - $ 10                             $ 500               $ 480               $ 20                 $ 30              - $ 30                             $ 700               $ 660               $ 20                 $ 30              - $ 50 14.If government spending increases by $ 15, what is the new equilibrium level of the real GDP? If government spending increases by $ 15 then to find the new equilibrium I can use the recessionary GAP formula Recessionary GAP = GDP Gap / Spending Multiplier                      (5)   15   = GDP Gap    (5)                                            5                             75    = GDP Gap GDP Gap + Old equilibrium level of the real GDP =…