1 The government decreases taxes by $300 million. Given that MPC = 0.9, how much will AD increase or decrease due to the multiplier effects? 2. Suppose the government wants to reduce AD by $300 million. MPC = 0.75. How much should government cut spending to decrease AD by $300 million?

1 The government decreases taxes by $300 million. Given that MPC = 0.9, how much will AD increase or decrease due to the multiplier effects? 2. Suppose the government wants to reduce AD by $300 million. MPC = 0.75. How much should government cut spending to decrease AD by $300 million?

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter18: Debates In Macroeconomics Over The Role And Effects Of Government

Section: Chapter Questions

Problem 1WNG

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Question

1 The government decreases taxes by $300
million. Given that MPC = 0.9, how much will
AD increase or decrease due to the multiplier
effects?
2. Suppose the government wants to reduce AD
by $300 million. MPC = 0.75. How much should
government cut spending to decrease AD by
$300 million?

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