Explain the effects of the following actions on equilibrium income. 1 . Government purchases rise by $20 billion. 2 . Taxes fall by $20 billion. Assume that the marginal propensity to consume is 0.8
1 . $100 billion calculated as: $20 billion /(1 - 0.8)
2 . $80 billion calculated as: (-0.8 ? -$20 billion)/(1 - 0.8)
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