Closing an output gap practice problems

Macroeconomics Unit 3. Try each one, then open the worked solution. The Credit Sprint app generates unlimited new versions with fresh numbers.

Problem 1.

There is a recessionary gap of $60 billion and the MPC is 0.5. What is the minimum increase in government spending needed to close it?

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Multiplier = 2. $60B ÷ 2 = $30B.

Problem 2.

There is a recessionary gap of $200 billion and the MPC is 0.8. What is the minimum increase in government spending needed to close it?

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Multiplier = 5. $200B ÷ 5 = $40B.

Problem 3.

There is a recessionary gap of $40 billion and the MPC is 0.5. What is the minimum increase in government spending needed to close it?

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Multiplier = 2. $40B ÷ 2 = $20B.

Problem 4.

There is a recessionary gap of $400 billion and the MPC is 0.9. What is the minimum increase in government spending needed to close it?

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Multiplier = 10. $400B ÷ 10 = $40B.

Problem 5.

There is a recessionary gap of $80 billion and the MPC is 0.75. What is the minimum increase in government spending needed to close it?

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Multiplier = 4. $80B ÷ 4 = $20B.

Problem 6.

There is a recessionary gap of $240 billion and the MPC is 0.75. What is the minimum increase in government spending needed to close it?

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Multiplier = 4. $240B ÷ 4 = $60B.