The Deepest the Output Gap Was During the Great Recession

question 5

Essay

The deepest the output gap was during the Great Recession was -7.46 percent in July 2009. Many believe that the multiplier used was 1.5. If this is true, what is
? What is
if the multiplier used was 1.25? What would the percent change in government expenditure be to close this gap, assuming monetary policy is not being used?

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Definitions:

Relative Poverty

The inability to secure goods and services required to live a life equal to working-class standards.

Working-Class Standards

Social and economic norms and expectations that define the lifestyle, values, and attitudes of the working class, a socio-economic group primarily engaged in manual labor.

Soviet Union

A former federal socialist state in Eastern Europe and Northern Asia, existing from 1922 until 1991, comprised of 15 republics and governed under a Communist regime.

International Banking

Banking activities that involve cross-border transactions, including foreign exchange, international loans, and managing investments across different countries.