Fiscal Policy: Work It Out According to recent estimates by Susan Woodward and Robert Hall, an extra dollar of government purchases raises GDP by one dollar—so there is little evidence for a "multiplier effect" in the short run, but also little evidence for "crowding out" in the short run. (Perhaps both effects are at work, but they just happen to balance out in practice.) Let’s use these estimates as a rule of thumb to solve the following economic puzzles. Answer in U. S. dollars. a. U. S. GDP is about $14 trillion and the Solow growth rate is 3%. Assume that a decrease in aggregate demand caused the growth rate to be only 1%. If Congress wants to return growth to the Solow growth rate and thus move the economy back onto the LRAS curve by increasing government purchases, how big of an increase in government purchases should it enact to close the gap?