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?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F4c1c00c9-61da-4a36-a982-648709db4355%2F8725c236-ca56-4fe5-9055-b94d3e81e38b%2Fofrj17_processed.jpeg&w=3840&q=75)
Transcribed Image Text: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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