Assume MPC = 0.85. If an initial fiscal restraint of $150 billion is desired, by how much must
a. Government spending be reduced?
billion
b. Taxes be raised?
billion

according to this law, when unemployment goes up by 1%, gdp drops by 2%. in the question, unemployment rate goes from 2% to 5%, meaning unemployment goes up by 3%, so the gdp drops by 6%. thus the effect is a drop in gdp by 6%.

step-by-step explanation:

the answer is two. hope this !