Due to an increase in consumer confidence, consumer spending has increased in the economy. The congressional budget office reported that potential GDP is $500 billion while real GDP is $2,000 billion dollars.
- Identify two (2) fiscal policy actions that would correct the problem in the economy. Explain each policy's impact on AD.
- If MPC is .75, calculate the amount of the change needed in each of the fiscal policy actions you identified in part A to correct the problem in the economy.