Question: I need help creating graphs for my problem attached Physical vs monetary policy . Tax Multiplier=-MPC/(1-MPC)=-0.75/0.25=-3 . To reduce the surplus gap of 220 billion
I need help creating graphs for my problem attached

Physical vs monetary policy . Tax Multiplier=-MPC/(1-MPC)=-0.75/0.25=-3 . To reduce the surplus gap of 220 billion dollars, taxes would be increased by 73.3 billion dollars. . Alternatively, the government can reduce its spending by using the Government Spending Multiplier (GSM). . Government Spending Multiplier=1/(1-MPC)=1/(1-0.75)=4 . To reduce the surplus gap of 220 billion dollars, the United States government would need to cut spending by $55 billion (4*$55 billion = $220 billion)
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
