Question: Question 4 (5 marks) If there is a recessionary gap of $100 billion and the magnitude of MPC is 0.8, by how much must

Question 4 (5 marks) If there is a recessionary gap of $100

Question 4 (5 marks) If there is a recessionary gap of $100 billion and the magnitude of MPC is 0.8, by how much must taxes be reduced to eliminate the recessionary gap? Assume that investment, net exports, government expenditures, and taxes do not change with changes in real GDP.

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