Say the MPC is .6 and suppose taxes are cut by $300 billion and government spending is increased by $200 billion. Use the multipliers to figure the effect of that change in fiscal policy on spending. The increase due to the tax cut =______. The increase due to the increase in government spending =_______. The total increase=_________.

(Government spending multiplier = 1/(1-mpc)

Tax multiplier = mpc/(1-mpc))

Answer rating: 100% (QA)

1 Increase due to Tax Cut Tax multiplier MPC 1 MPC 06 1 06 06 04 15 I... View the full answer