Chapter11: Managing Aggregate Demand: Fiscal Policy
Section11.A: Graphical Treatment Of Taxes And Fiscal Policy
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Suppose the potential output is 50 trillion and autonomous spending is 10 trillion. Compute the mpc.
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Transcribed Image Text:Question 23
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Suppose the potential output is 50 trillion and autonomous spending is 10 trillion. Compute the mpc.
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Expert Solution
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Step 1
MPC is the marginal propensity to consume.
M)C is calculated as the change in consumption divided by the change in income.
So,
MPC = ∆C/∆Y
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