Suppose consumption, investment, government, and net exports in the economy are expressed in the following equations:
C = 170 + 0.9 (Y)
I = 200
G = 30
X = 50
M = 60
Assuming the full-employment GDP level is at $4,100, this economy is experiencing a _____ GDP gap and that the government should ____ spending by ____.
1. cannot be computed based on information provided
2. recessionary ; increase ; $20
3. inflationary ; decrease ; $25
4. recessionary ; increase ; $25
5. inflationary ; decrease ; $20