Answer one of the following options (Option A or Option B) 250 words

Answer one of the following options (Option A or Option B) 250 words

250 WORDS

Option A: Describe the fiscal policy remedies that a Keynesian economist might prescribe to close a recessionary gap. What impact would these policy changes have on the federal budget deficit and the public debt?

Option B: What type of relationship exists between the marginal propensity to consume (MPC) and the multiplier? Explain why this relationship exists. Give a hypothetical numerical example to help support your answer.

 

 

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Discussion

Option A

A recessionary gap, also known as an inflationary gap is a term that is used to describe an economy that is operating below the full-employment equilibrium. In such a scenario, the level of the GDP within the country is usually lower than full employment (Kose, Terrones, & International Monetary Fund. 2015).

(270 words)

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