Assume the following data for this economy. Full employment GDP occurs at $400. Assume that the MPC = 0.75.  All figures are in billions of dollars.

GDP              C                    S                     I                      G

240                 244                 -4                    8                     8

260                 260                 0                     8                     8

280                 276                 4                     8                     8

300                 292                 8                     8                     8

320                 308                 12                   8                     8

340                 324                 16                   8                     8

360                 340                 20                   8                     8

380                 356                 24                   8                     8

400                 372                 28                   8                     8

1.Equilibrium GDP for this economy is ___________.

2.What is the problem facing this economy? _____________________

3.What general solution do you recommend? ____________________

4.The simple multiplier in this problem is equal to __________________.

5.What is the needed change in government spending: ________________