Answer to Question #269953 in Macroeconomics for Anna

Question

According to Keynesian economists, closing a short-run expansionary gap of $5 million means government purchases will need to be:

 

A. increased by $5 million.

B. decreased by $5 million.

C. increased by more than $5 million.

D. decreased by less than $5 million.

Answer 1

Solution:

The correct answer A. increased by $5 million.

 

The government should undertake an expansionary fiscal policy and increase government purchases by $5 million so as to restore to actual equilibrium and close the short-run expansionary gap.