If short-run equilibrium output equals 10,000, the income-expenditure multiplier equals 5, the mpc equals 0.8, and potential output (Y*) equals 9,000, then taxes must be ________ by approximately ________ to eliminate any output gap.
A. increased; 250
B. increased; 200
C. decreased; 250
D. decreased; 200
Answer: A
Economics
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