you have been appointed as chair of Economic Advisors in Fantasyland. Income is currently $600,000, unemployment is 5 percent, and there are signs of coming inflation. You rely on a research assistant for specific numbers. He tells you that full employment GDP is $564,000 and MPE = 0.5.
a. The government wants to eliminate the inflationary gap by changing expenditures. What policy do you suggest?
b. By how much will unemployment change after your policy has taken effect?