Suppose the government, in an effort to avoid an increase in the deficit, votes for a budget neutral tax cut policy. Assume the marginal propensity to consume (MPC) is equal to 0.75 and taxes are cut by $15 billion. Round answers to the nearest billion, and specify decreases as a negative number. By how much will government spending change? change in government spending: $ What is the resulting change in the equilibrium level of real GDP? billion
Suppose the government, in an effort to avoid an increase in the deficit, votes for a budget neutral tax cut policy. Assume the marginal propensity to consume (MPC) is equal to 0.75 and taxes are cut by $15 billion. Round answers to the nearest billion, and specify decreases as a negative number. By how much will government spending change? change in government spending: $ What is the resulting change in the equilibrium level of real GDP? billion
Chapter11: Fiscal Policy
Section: Chapter Questions
Problem 1.4P
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![Suppose the government, in an effort to avoid an increase in the deficit, votes for a budget neutral tax cut policy. Assume the
marginal propensity to consume (MPC) is equal to 0.75 and taxes are cut by $15 billion. Round answers to the nearest billion,
and specify decreases as a negative number.
By how much will government spending change?
change in government spending: $
What is the resulting change in the equilibrium level of real GDP?
change in equilibrium level of real GDP: $
billion
billion](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F6db2f3ac-3ca0-4850-ac10-813504312796%2Fd71d237c-3e1d-4a85-afb8-f6c9d731cda7%2Flcg2s9s_processed.png&w=3840&q=75)
Transcribed Image Text:Suppose the government, in an effort to avoid an increase in the deficit, votes for a budget neutral tax cut policy. Assume the
marginal propensity to consume (MPC) is equal to 0.75 and taxes are cut by $15 billion. Round answers to the nearest billion,
and specify decreases as a negative number.
By how much will government spending change?
change in government spending: $
What is the resulting change in the equilibrium level of real GDP?
change in equilibrium level of real GDP: $
billion
billion
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