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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 0.9 and taxes are cut by $10 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: $ -10 What is the resulting change in the equilibrium level of real GDP? -100 change in equilibrium level of real GDP: $ Incorrect billion 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 0.9 and taxes are cut by $10 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: $ -10 What is the resulting change in the equilibrium level of real GDP? -100 change in equilibrium level of real GDP: $ Incorrect billion billion.

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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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 0.9 and taxes are cut by $10 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: $ -10 What is the resulting change in the equilibrium level of real GDP? -100 change in equilibrium level of real GDP: $ Incorrect billion billion.
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 0.9 and taxes are cut by $10 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: $ -10 What is the resulting change in the equilibrium level of real GDP? -100 change in equilibrium level of real GDP: $ Incorrect billion billion.
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