Assume that government purchases decrease by $10 billion, with other factors held constant, including the price level.

Question:

Assume that government purchases decrease by $10 billion, with other factors held constant, including the price level. Calculate the change in the level of real GDP demanded for each of the following values of the MPC. Then, calculate the change if the government, instead of reducing its purchases, increased net taxes by $10 billion.

a. 0.9

b. 0.8

c. 0.75

d. 0.6

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question
Question Posted: