Final answer:
Government purchases would need to change based on the Keynesian cross model and fiscal policy multipliers. The exact change in spending or taxes required to eliminate an output gap depends on economic parameters and the sizes of the fiscal multipliers.
Step-by-step explanation:
The main answer to the question of how much government purchases would need to change to eliminate any output gap depends on understanding the Keynesian cross model and fiscal policy multipliers. To calculate the required change in government spending to achieve full employment, we need to determine the multiplier effect of government spending. The formula for the government spending multiplier is 1/(1-MPC(1-t)), where MPC is the marginal propensity to consume, and t is the tax rate. Taxes, on the other hand, have a different multiplier because they indirectly affect consumption. The tax multiplier is -MPC/(1-MPC(1-t)). For the tax rate and consumption function provided, we could use these formulas to determine the necessary fiscal adjustments.To answer the question of how much each citizen would pay to eliminate debt or how taxes would need to change, one would require details on the total debt and demographic information, which is not provided here. Regarding altering fiscal policy like spending cuts or tax increases, it is acknowledged that the exact effects on aggregate demand are controversial and not precisely known, as the real-world doesn't always align with theoretical models.In conclusion, to eliminate an output gap, we need to calculate the fiscal policy multipliers based on given economic parameters and then apply those to determine the required changes in government spending or taxes. The exact amounts will depend on the initial circumstances and the size of the fiscal multipliers, which are derived from the marginal propensities to consume and save as well as the tax rate.