Assume that the marginal propensity to consume is 0.75. The government wishes to increase the equilibrium gross domestic product by $100 million. This can be achieved either by increasing government spending or decreasing taxes. Calculate the multiplier effect and necessary increase in government spending
Assume that the marginal propensity to consume is 0.75. The government wishes to increase the equilibrium gross domestic product by $100 million. This can be achieved either by increasing government spending or decreasing taxes. Calculate the multiplier effect and necessary increase in government spending
Chapter11: Fiscal Policy
Section: Chapter Questions
Problem 6SQP
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Assume that the marginal propensity to consume is 0.75. The government wishes to increase the equilibrium gross domestic product by $100 million. This can be achieved either by increasing government spending or decreasing taxes. Calculate the multiplier effect and necessary increase in government spending?
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