Suppose the Federal government raises taxes which would decrease consumption by $50 billion, that the spending multiplier was 5, the money supply was $500 billion, and the inflation rate was 5%. Using the formula with "Multiplier = change in equlibrium GDP/initial change in spending formula" to calculate the equilibrium U.S. GDP with the above information (Note:

Suppose the Federal government raises taxes which would decrease consumption by $50 billion, that the spending multiplier was 5, the money supply was $500 billion, and the inflation rate was 5%. Using the formula with "Multiplier = change in equlibrium GDP/initial change in spending formula" to calculate the equilibrium U.S. GDP with the above information (Note:

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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