Essay
Suppose that the government increases expenditures by $150 billion while increasing taxes by $150 billion. Suppose that the MPC is .80 and that there are no crowding out or accelerator effects. What is the combined effects of these changes? Why is the combined change not equal to zero?
Correct Answer:
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The multiplier is 1/(1-MPC) = 1/(1-.8) =...View Answer
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