Assume that MPC = 4/5 when answering the following questions. a. If government expenditures rise by $1
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a. If government expenditures rise by $1 billion, by how much will the aggregate expenditure curve shift upward?
b. If taxes rise by $1 billion, by how much will the aggregate expenditure curve shift downward?
c. If both taxes and government expenditures rise by $1 billion, by how much will the aggregate expenditure curve shift? What will happen to the equilibrium level of real GDP?
d. How does your response to the second question in part (c) change if MPC = 3/4? If MPC = 1/2?
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a The aggregate expenditure curve shifts up by 1 billion equilibrium real GDP incr...View the full answer
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