Consider an economy with households, government, and firms. All government spending is financed by a proportional tax
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Consider an economy with households, government, and firms. All government spending is financed by a proportional tax of t=0.2 and debt. There is an exogenous decrease in the firm investment of 10 billion. By how much will equilibrium output change if the MPC is c = 0.8? (Answers rounded to nearest billion).
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