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Problem 2 (15%) Year Actual Real GDP Potential GDP Price Level Unemployment 2017 KD 13

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Problem 2 (15%) Year Actual Real GDP Potential GDP Price Level Unemployment 2017 KD 13.4 billion KD 13.4 billion 100 7% 2018 KD 11.5 billion KD 13.4 billion 96 16% 1. Describe country's macroeconomic condition in these two years in terms of macroeconomic equilibrium and business cycle. What happened in the economy in 2018? 2. If the government purchases multiplier is 3 and the tax multiplier is -1.5, a) By how much will government purchases need to be changed to bring the economy to equilibrium at potential GDP? b) By how much will taxes have to be changed to bring the economy to equilibrium at potential GDP?