How large is recessionary gap after fall planned investment, Microeconomics

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How large is recessionary gap after fall planned investment

Discussion:

An economy is initially at full employment, but a decrease in investment spending pushes the economy into recession. Assume that the multiplier is 4. a. How large is the recessionary gap after the fall in planned investment? b. By how much would the government have to change its purchases to restore the economy to full employment?

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Microeconomics: How large is recessionary gap after fall planned investment

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Microeconomics: How large is recessionary gap after fall planned investment

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