If the economy has an MPC of 0.8, by how much will a $50 billion increase in government purchases increase GDP? By how much will a $50 billion increase in taxes decrease GDP?

What will be an ideal response?


With an MPC of 0.8, the multiplier is 1/(1 - 0.8 ) = 5, so an increase in spending will increase GDP by $250 billion. The tax multiplier would equal -4, so the increase in taxes would reduce GDP by $200 billion.

Economics

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For a common resource, the equilibrium with no government intervention is such that ________ is less than ________

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Zipco's accounting profit is equal to its

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Economics

All of the following are variables that can be manipulated to affect fiscal policy, except one. Which is the exception?

What will be an ideal response?

Economics