Assume we are facing a recessionary gap (RG) of $20 million.
Explain the tools the government has at its disposal to close the gap, using FISCAL policy and in what direction it would use them, given that we have a RG (increase, decrease?). Give the exact dollar values needed to close the gap. Assume that the MPC is 0.4.
If government spends $10 million, how much income will be generated?