Essay
Assume that investment, net exports, government expenditures, and taxes do not change with changes in real GDP and the MPC is .75.(a) Suppose government spending increases by $20 billion.What is the impact on real GDP?
(b) Suppose that instead lump-sum taxes increase by $20 billion.What is the impact on real GDP?
(c) How would the results in (a) and (b) be different if imports and taxes increase as real GDP increases?
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(a) Since the MPC is .75, the multiplier...View Answer
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