Assuming a fixed amount of taxes and a closed economy, calculate the value of the government purchases multiplier, the tax multiplier, and the balanced budget multiplier if the marginal propensity to consume equals 0.75
What will be an ideal response?
Government purchases multiplier = 1 / (1 - 0.75 ) = 4
Tax multiplier = -0.75 / (1 - 0.75 ) = ?3
Balanced budget multiplier = 1
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