The Government increases spending by TL 8 billion to prevent the economy from sliding into a recession. Economists estimate that the marginal propensity to consume is 75 %. (Assume there is no crowding out.) How much will aggregate demand increase as a result of the new spending programme? Choose. Now suppose the government reduces taxes by TL 8 billion instead of increasing spending. How much will aggregate demand increase as a result of tax reduction? Choose. TL 24 billion

The Government increases spending by TL 8 billion to prevent the economy from sliding into a recession. Economists estimate that the marginal propensity to consume is 75 %. (Assume there is no crowding out.) How much will aggregate demand increase as a result of the new spending programme? Choose. Now suppose the government reduces taxes by TL 8 billion instead of increasing spending. How much will aggregate demand increase as a result of tax reduction? Choose. TL 24 billion

MACROECONOMICS FOR TODAY

10th Edition

ISBN:9781337613057

Author:Tucker

Publisher:Tucker

Chapter11: Fiscal Policy

Section: Chapter Questions

Problem 5SQP

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Question 7. Suppose a closed economy with no government spending which in equilibrium is producing an output and income of 2300. Suppose also that the marginal propensity to consume is 0.80, and that, if at full employment, the economy would produce an output and income of 3750 By how much would the government need to cut taxes (T) to bring the economy to full employment? (round your answer to the nearest whole value) Your Answer: Answer View hint fr