Essay
The MPC in Montavada is .75.
(a) If taxes were reduced by $1,000 in Montavada, by how much would equilibrium output change?
(b) If government spending were increased by $1,000 in Montavada, by how much would equilibrium output change?
(c) Explain why a tax cut of $1,000 would have less effect on the economy of Montavada than an increase in government spending of $1,000.
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Correct Answer:
Verified
(a) If taxes are reduced by $1,000, equ...
View Answer
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