For the next two questions you can look at Keynes and fiscal policy:
1. Assume that a nation’s marginal propensity to consume is 0.8, and that its potential GDP exceeds its actual real GDP by $3000 (There is a recessionary gap). By how much should that nations’ government initially change its spending (G) in order to close that GDP gap?
2. Assume that a nation’s marginal propensity to consume is 0.8, and that its actual GDP exceeds its potential GDP by $3000 (There is an inflationary gap). By how much should that nations’ government initially change taxes in order to close that GDP gap?