If GDP in Makala is $300, what is the government's budget balance? b) If government spending is increased by the size of the deficit, and the multiplier is 2.5, what is the new level of equilibrium GDP? c) What is the size of the government's deficit at this new level of equilibrium GDP?

If GDP in Makala is $300, what is the government's budget balance? b) If government spending is increased by the size of the deficit, and the multiplier is 2.5, what is the new level of equilibrium GDP? c) What is the size of the government's deficit at this new level of equilibrium GDP?

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter30: Government Budgets And Fiscal Policy

Section: Chapter Questions

Problem 25RQ: What are the main categories of U.S. federal government taxes?

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Question

Answer the questions below for the economy of Makala, using the following graph:

a) If GDP in Makala is $300, what is the government's budget balance?
b) If government spending is increased by the size of the deficit, and the multiplier is 2.5, what is the new level of equilibrium GDP?
c) What is the size of the government's deficit at this new level of equilibrium GDP?

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Real GDP
Government spending/net taxes

Definition Video Definition Overall monetary value of all the complete or final services and goods that a country can produce within its domestic boundaries in a specific period. Video

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