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Calculate GDP loss if equilibrium level of GDP is $8,000, unemployment rate 8.8%, and the MPC...

Calculate GDP loss if equilibrium level of GDP is $8,000, unemployment rate 8.8%, and the MPC is 0.80. Hint: (Use Okun's law to calculate GDP loss)

a) How much money should the government spend to eliminate this GDP loss?

b) Calculate the tax cut needed to eliminate this GDP loss.

Assume that initially G is $300 and equilibrium real GDP is $5000. If the multiplier is 5, what would be the new equilibrium level of GDP if Government expenditures increase to $500.

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